We are li & Fung - HKEXnews

We are li & Fung

(Incorporated in Bermuda with limited liability)

Stock Code: 4942015Annual Report

2 About Li & Fung

4 A letter from our Chairman

8 A letter from our CEO

10 Summary of the year

12 Our performance

32 Our commitment to good governance

50 Our approach to risk management

60 Our board and management team

70 Our people

80 Our supply chain

92 Our communities

100 Our footprint

110 Information for investors

111 Report of the Directors

124 Independent auditor’s report

126 Financial statements

224 Ten-year financial summary

226 Glossary

228 Corporate information

On our cover:

Meet some of our Management Associates

from The Program for Management Development

Back row (from left to right):

Kiril Popov, Dorothy Pun, Wasif Munir, Sandeep Chinthireddy

Front row (from left to right):

Tanya Yeung, Rochelle Burton, Pamela Alimurung

Photo by Larry Yeung

Contents

About Li & Fung

We are the leading consumer goods design, development, sourcing and logistics company for major retailers and brands around the world. We specialize in responsibly managing supply chains of high-volume, time-sensitive goods.

WHO WE ARE

BUILDING A SUSTAINABLE BUSINESS

Across our business, three core values, which have not changed since 1906, bring us together and guide everything we do. Our values are more than just words. They are meaningful expressions of who we are.

THREE-YEAR PLAN GOALS (2014–2016)

We are committed to the principles of transparency, accountability and independence and believe this enhances shareholder value.

GOOD GOVERNANCE

We are entrepreneursWe are humbleWe are family

OUR VALUES

RECOGNITION

Sustainability is integral to our business and planning process. When developing our three-year plans, we assess our progress against our sustainability goals, set aspirational targets against best practice benchmarks and take action to meet those benchmarks.

Keeping things simple Driving organic growthBuilding a sustainable enterprise

SUPPLY CHAIN

SUSTAINABILITY

Managingrisk and

compliance

Sourcingresponsibly

Collaboratingwith industry

Investingin potential

Helpingcommunities

in need

Mobilizingfor change

Environmentalawareness

Sustainabledesign

Resourcemanagement

C.A.R.E.

Wellbeing

Career

ENGAGING OUR

COMMUNITIES

MANAGING OUR

FOOTPRINT

ENGAGING OUR

PEOPLE

OUR GLOBAL PRESENCE

THE AMERICAS

EUROPE

AFRICA

ASIA

Performanceand

compliance

Corporateinitiatives

andsustainable

growth

Long-termshareholder

value> >>

Reliable�nancialreporting

Effective

ef�cientand

operations

Compliancewith

applicable lawsand

regulations

We operate an extensive global supply chain network with more than 25,000 people in over 300 offices and distribution centers around the world, working with our vendor base of 15,000 suppliers to add value to our global brand and retail customers.

40 +ECONOMIES

OUR BUSINESS

Buyer planning

Wholesaler

Brands andretailers

Consumers Product design

Productdevelopment

Factorysourcing

Raw materialprocurement

Manufacturingcontrol

Vendorcompliance

DC and transportmanagement

Freight forwarding andcustoms clearance

Hubbing andconsolidation

Localtransportation

END-TO-ENDSUPPLY CHAIN MANAGEMENT

About Li & Fung

We are the leading consumer goods design, development, sourcing and logistics company for major retailers and brands around the world. We specialize in responsibly managing supply chains of high-volume, time-sensitive goods.

WHO WE ARE

BUILDING A SUSTAINABLE BUSINESS

Across our business, three core values, which have not changed since 1906, bring us together and guide everything we do. Our values are more than just words. They are meaningful expressions of who we are.

THREE-YEAR PLAN GOALS (2014–2016)

We are committed to the principles of transparency, accountability and independence and believe this enhances shareholder value.

GOOD GOVERNANCE

We are entrepreneursWe are humbleWe are family

OUR VALUES

RECOGNITION

Sustainability is integral to our business and planning process. When developing our three-year plans, we assess our progress against our sustainability goals, set aspirational targets against best practice benchmarks and take action to meet those benchmarks.

Keeping things simple Driving organic growthBuilding a sustainable enterprise

SUPPLY CHAIN

SUSTAINABILITY

Managingrisk and

compliance

Sourcingresponsibly

Collaboratingwith industry

Investingin potential

Helpingcommunities

in need

Mobilizingfor change

Environmentalawareness

Sustainabledesign

Resourcemanagement

C.A.R.E.

Wellbeing

Career

ENGAGING OUR

COMMUNITIES

MANAGING OUR

FOOTPRINT

ENGAGING OUR

PEOPLE

OUR GLOBAL PRESENCE

THE AMERICAS

EUROPE

AFRICA

ASIA

Performanceand

compliance


andsustainable

growth


value> >>


Effective

ef�cientand

operations

Compliancewith

applicable lawsand

regulations

We operate an extensive global supply chain network with more than 25,000 people in over 300 offices and distribution centers around the world, working with our vendor base of 15,000 suppliers to add value to our global brand and retail customers.

40 +ECONOMIES

OUR BUSINESS

Buyer planning

Wholesaler

Brands andretailers

Consumers Product design

Productdevelopment

Factorysourcing

Raw materialprocurement

Manufacturingcontrol

Vendorcompliance

DC and transportmanagement

Freight forwarding andcustoms clearance

Hubbing andconsolidation

Localtransportation

END-TO-ENDSUPPLY CHAIN MANAGEMENT

LI & FUNG LIMITEDANNUAL REPORT 20154

A letter from our Chairman

The cornerstone of our business continues to be our ability to change and adapt while retaining a culture of hard work and loyalty.

“

Dear Shareholders,

In 2015, the second year of our current Three-Year Plan (2014-2016), Li & Fung continued to

strengthen its position as the world’s leading global supply chain manager for consumer goods.

A key theme of the current Three-Year Plan is organic growth, and our strategies and plans were

formulated with this focus in mind. Despite strong macro headwinds and a challenging retail

landscape, the Company delivered resilient results in 2015.

We are entering our 110th year of operation. From our humble beginnings in 1906, as a

small family-owned trading company in Canton, to a Hong Kong-based multinational public

corporation today, we have experienced good times and bad through numerous political and

economic cycles. The cornerstone of our business continues to be our ability to change and

adapt while retaining a culture of hard work and loyalty to a strong base of core customers,

our dedicated management and colleagues, and our global network of vendors. With these

strengths, I am confident that we are well-equipped to ride through the turbulent markets we

are witnessing today and to continue to lead the industry.

Our 2015 PerformancePerformance in 2015 was muted with tough macro headwinds and the impact of e-commerce

and margin pressure on the retail sector across our major markets. We maintained our top

line while achieving volume growth for our trading business, but experienced some margin

deterioration from the tough business environment. Nevertheless, the business remained highly

cash generative. We ended 2015 with a solid cash balance, and the Board has resolved to

declare a final dividend of 15 HK cents per share, after paying an interim dividend of 13 HK cents

per share earlier in the year. I expect our strong cash position will be maintained, given our

limited capital expenditure requirements and our organic growth strategy, for the remainder

of the current Three-Year Plan.

The retail landscape is undergoing substantial changes. As a dynamic industry, retailers are

constantly evolving in terms of store formats, product categories, marketing trends and sales

channels. One of the latest trends, e-commerce and omni-channel retailing, has intensified

competition for retailers and brands globally, leading to the highly price promotional landscape

we saw in 2015. Over the long run, however, this highly promotional environment is not

sustainable. Unprofitable companies will exit and there is tremendous pressure for all retailers,

including online pure-plays, to enhance margins through product differentiation.

As a strategic sourcing partner, we not only serve our traditional brand and retail customers as

they grow their online channels, we also source products for online retailers, many of whom are

only just beginning to develop their own private label collections.

I expect the highly promotional situation to normalize as global economies recover and

companies work through sustainable online sales strategies. I am confident that Li & Fung

is well-positioned to benefit from the tailwinds once the market settles.

LI & FUNG LIMITEDANNUAL REPORT 2015 5

A letter from our Chairman (continued)

William FungGroup Chairman



New Frameworks Impacting Global TradeLi & Fung has a broad vendor base spanning over 40 economies. This geographical

diversification provides us with high flexibility, which is particularly important as the complexity

of the sourcing world continues to intensify. New developments in the sourcing landscape, such

as the shifting of production between countries, changes in international trade agreements,

government policies and geopolitical tensions, add considerable uncertainty and complexity

to global supply chains. Our long experience and established vendor networks in all major

production economies provide the necessary diversification and flexibility that enable us

to respond quickly and appropriately in times of change.

The Trans-Pacific Partnership (TPP) was widely discussed in 2015, and is expected to

particularly benefit the textile and garment industry in Vietnam. Our long experience in shifting

manufacturing bases across different countries will allow us to take full advantage of TPP and

we are well entrenched in Vietnam, which is our second largest production country.

China’s Increasing Influence on Global Trade2015 witnessed the formal introduction of China’s One-Belt-One-Road initiative (“Initiative”),

with action plans designed to connect and further integrate the various economies along the

“21st Century Silk Road”. Although not a formal trade treaty, this important Initiative is expected

to bring tremendous trading opportunities to participating countries.

Although the Initiative is in its early stages, Li & Fung is well-positioned to benefit as the

Initiative develops and matures. As we have already established relationships with vendors

in most of the participating countries, little additional investment, of both time and money,

will be required for us to capitalize on the Initiative. Our deep experience in managing global

supply chains, coupled with new sourcing opportunities, will enable us to provide innovative

value-added solutions to our customers in the years to come. The Initiative will also open up

new customer markets for both our trading and logistics businesses.

Another development from the Chinese government during 2015 was its announcement of the

13th five-year plan. With GDP growth planned to be no less than 6.5% p.a. and an emphasis

on “innovative development”, there is likely to be substantial changes in the Chinese sourcing

landscape as production of certain product categories will decant from China, while others will

move into China. To this end, Li & Fung is well prepared to respond to these potential changes

given our large sourcing network spanning many alternative production countries. At the same

time, as China continues its structural reform to move toward a more domestic consumption-

driven growth model, there is huge potential for us to further convert Chinese retailers and

brands as customers.

Our geographical diversification provides us with high flexibility.

“



Logistics NetworkOur in-country logistics business is primarily focused on Asia, especially China. During 2015,

we experienced continued rapid growth especially in the e-logistics arena. We have become

the strategic logistics partner of choice for many major global brands and have assisted many

customers to complement online-to-offline (O2O) retail experiences for the Chinese consumers.

With the acquisition of China Container Line (CCL) in 2014, our global freight forwarding business

is now entering an expansion phase and is becoming an integral part of our end-to-end supply

chain solutions for our trading customers.

Vendor Support Services (VSS)Leveraging our relationships with our vendors, we introduced the VSS program to offer a whole

range of vendor-related services such as compliance training, industrial optimization, raw

material procurement, risk management, product testing and trade credit services to vendors

across the globe. 2015 was a year of trial and experimentation of our VSS program, and I am

pleased to report success in this new business area. Our program has been progressing ahead

of plan as we rolled out VSS to our existing vendor base. There will be a meaningful contribution

from VSS to our core operating profit in 2016. Beyond 2016, we expect VSS to transform our

vendors into a whole new customer group and for these services to develop into an exciting

new business segment for the Company.

ProspectsIn view of the current macro conditions, 2016 is likely to be another challenging year for our

customers. While there will be some growth in our biggest market, the US, that growth is

unlikely to be robust. We expect Europe’s consumer demand will continue to stagnate or

decline and Asia to slow. For Li & Fung, this means ongoing volume and pricing pressures for

our trading business, amidst continuing price deflation and negative translational impact from

a weak Euro and Asian currencies. Nevertheless, new customer wins in 2014 and 2015 will begin

to contribute more meaningfully in 2016 and 2017 and provide further opportunities for deeper

account penetration, cross-selling and increased market share. Our VSS program will contribute

to profitability, and our logistics business is expected to maintain robust growth through new

business wins and geographical expansion, led by our excellence and expertise in in-country

logistics, particularly e-logistics.

In 2016, the last year of our current Three-Year Plan, we will commence planning and preparation

work for our next Three-Year Plan for the period 2017 to 2019.

In closing, I would like to extend my gratitude to our colleagues for their dedication and support

to management and the Company over the year.

Yours sincerely,

William Fung Kwok Lun

Group Chairman


A letter from our CEO

We continue to simplify our structure and business to allow our teams to improve their speed and flexibility as they serve customers.

“

Dear Shareholders,

Overall, 2015 was a challenging year for the Company. Demanding macroeconomic, geopolitical

and industry conditions created an extremely tough environment for our business. Our major

markets in US, Europe and Asia all experienced strong headwinds and globally our industry

is going through an unprecedented structural change, led by the changing conditions at retail.

The structural changes at retail are impacting the way everyone works along the value chain.

Retail is becoming more competitive as more e-commerce players enter the marketplace and

global competition overall is being augmented by cloud computing, mobile connectivity and

cross-border logistics. Consumer preferences and buying patterns are also changing led by

Millennials and the newer Generation Z. The way these consumers discover, socialize and finally

make a purchase decision has had immense consequences to brand loyalty, to sustainability,

and to the sharing economy. All of these changes are transformative to the way we do business

and the speed of change is only increasing as we look ahead.

As a result, we are reorganizing to focus even more on our core customers to offer even better

solutions and to increase our overall market share of their business as we help them navigate

these changes. We are building asset-light product verticals in sweaters, furniture and beauty

to help our customers differentiate their product offerings and increase their margins. We are

partnering with companies who offer technology and innovative solutions to create products

with more excitement. Organizationally, we continue to simplify our structure and business

to allow our teams to improve their speed and flexibility as they serve customers. Finally,

we have introduced processes employed by startup companies – rapid prototyping and rapid

experimentation – to move fast, act on new ideas and create a culture of innovation.


A letter from our CEO (continued)

2015 was the second year of our Three-Year Plan and we are on track with our strategic goals

of building a sustainable enterprise, keeping things simple and focusing on organic growth. All

decisions we make as a team continue to be long-term focused to ensure that our company and

business is sustainable into the future. Simplifying our organization and aligning our teams to our

core customers and key product verticals ensures that we take complexity out of our business

and move fast as an organization. With fewer acquisitions in 2015 compared to previous years,

we have been very focused on growing organically and increasing our market share with our

existing customer base and are keenly focused on improving operating efficiencies.

Our turnover in 2015 was resilient despite a deflationary environment and we grew our trading

unit volumes along the way. We also grew with our core customers despite their challenging

retail environments. In the second half of the year, we were able to keep operating costs flat

despite ongoing investments in infrastructure, Logistics and Vendor Support Services (VSS).

Our Logistics business in particular continued to deliver double-digit growth against the backdrop

of a tough environment in Asia and the freight market, with e-commerce logistics an even

brighter star within that growth.

Finally, our employees globally, who despite the headwinds we are seeing in the market, are

highly engaged, highly connected and experienced professionals. We are all guided by our

strong values of being family, being entrepreneurial, and staying humble, the same values that

we started the Company with 110 years ago in 1906. Our strong values along with our long-term

thinking and a relentless drive to stay at the forefront of innovation will see us through these

tough times. All indications point towards a challenging 2016, but I am confident we will weather

these changes as we build for the future.

Yours sincerely,

Spencer Fung

Group CEO

OPERATING CASH FLOW CASH AND BANK BALANCES GEARING RATIO

TURNOVER CORE OPERATING PROFIT

2015 GROUP OVERVIEW OUR PEOPLE

US$ 544M US$ 342M 27%

US$18,831MTOTAL MARGIN

US$ 2,189M US$ 512M

45%OF OUR

MANAGEMENTWORLDWIDEIS FEMALE

OUR WORKFORCE

TradingLogistics

GROUP GEOGRAPHICAL MARKET TURNOVER

USAEuropeAsiaRest of World

US$ 18,831M

62%17%

15%

6%

TURNOVER DIVIDENDS PER SHARE (TOTAL)

28.0HK cents UScents3.61

EARNINGS PER SHARE (BASIC)

HK cents39.1 UScents5.04

OUR COMMUNITIES

EMPLOYEESWORLDWIDE

54%FEMALE

46%MALE

25,320

OUR FOOTPRINT

OUR SUPPLY CHAIN

Summary of the year

25%

75%

-12%INTENSITY REDUCTION

in water consumption


in greenhouse gas emissions (scope 1 and 2)

ELECTRIC VEHICLEjoins Hong Kong’s

vehicle fleet

13LEED/BREEAM

sustainable buildingcertifications

increase over 2014

IN-HOUSE LEARNINGPROGRAMS IN 2015

10%

VOLUNTEER HOURS30,000

ACTIVITIES374

OUR PEOPLE VOLUNTEERED

14,000 times DONATED BY OUR PEOPLE368,000US$

participated in community initiativesin84 LOCATIONS COUNTRIES22

++ +

SUPPLIERSWORLDWIDE

15,000+

10,601 Sustainability Resource Center websiteWEBSITE VISITS

6,965 factory representatives and 5,044 employees attendedTRAINING SESSIONS591

1. China 2. Vietnam 3. Bangladesh

THREE LARGEST SOURCING MARKETS

OPERATING CASH FLOW CASH AND BANK BALANCES GEARING RATIO

TURNOVER CORE OPERATING PROFIT

2015 GROUP OVERVIEW OUR PEOPLE

US$ 544M US$ 342M 27%

US$18,831MTOTAL MARGIN

US$ 2,189M US$ 512M

45%OF OUR

MANAGEMENTWORLDWIDEIS FEMALE

OUR WORKFORCE

TradingLogistics

GROUP GEOGRAPHICAL MARKET TURNOVER

USAEuropeAsiaRest of World

US$ 18,831M

62%17%

15%

6%

TURNOVER DIVIDENDS PER SHARE (TOTAL)

28.0HK cents UScents3.61

EARNINGS PER SHARE (BASIC)

HK cents39.1 UScents5.04

OUR COMMUNITIES

EMPLOYEESWORLDWIDE

54%FEMALE

46%MALE

25,320

OUR FOOTPRINT

OUR SUPPLY CHAIN

Summary of the year

25%

75%


in water consumption


in greenhouse gas emissions (scope 1 and 2)

ELECTRIC VEHICLEjoins Hong Kong’s

vehicle fleet

13LEED/BREEAM

sustainable buildingcertifications

increase over 2014


10%


ACTIVITIES374




++ +

SUPPLIERSWORLDWIDE

15,000+

10,601 Sustainability Resource Center websiteWEBSITE VISITS

6,965 factory representatives and 5,044 employees attendedTRAINING SESSIONS591

1. China 2. Vietnam 3. Bangladesh

THREE LARGEST SOURCING MARKETS


Our performance

Results Overview2015 Performance

Results2015 2014 Change

US$m US$m %

Turnover 18,831 19,288 (2.4%)

Total Margin 2,189 2,244 (2.5%)

% of Turnover 11.6% 11.6%

Operating Costs 1,676 1,640 +2.2%


Core Operating Profit 512 604 (15.2%)


Loss from Discontinued Operations – (98)

Profit Attributable to Shareholders 421 441 (4.6%)

Profit Attributable to Shareholders

(ex-Loss from Discontinued Operations) 421 539


Against a backdrop of one of the most challenging retail environments seen for many years,

Li & Fung delivered a resilient performance in 2015. Our Trading Network held up well while

our Logistics Network continued to grow. Despite headwinds from currency depreciation and

a deflationary environment, our turnover with core trading customers and unit volume grew.

Our logistics business maintained its strong profitable growth momentum across its in-country

logistics and global freight management services. The growth was even stronger in the e-logistics

operations which took advantage of the e-commerce boom. Accordingly, in spite of the

economic slowdown in many parts of Asia and the unprecedented drop in ocean freight rates,

our Logistics Network finished the year showing both turnover and unit volume growth.

Our business continued to be highly cash generative, allowing us to end the year in a solid

financial position. We continue to maintain a high dividend payout ratio. Over the past three years,

we have returned over US$1.2 billion in cash dividends to our Shareholders.


Our performance (continued)

2015 was a difficult year due to economic slowdown and political uncertainties in Europe

and Asia. While the US is slowly recovering, retailers were adversely affected by the soft

retail environment, unseasonably warm weather, and global geopolitical disturbances. In the

meantime, increased competition from fast fashion, off-price and e-commerce players continue

to challenge our retail customers in a highly promotional retail environment. This resulted in

margin pressure for all brands and retailers and impacted the entire supply chain.

We have been executing strategies to help our customers navigate an increasingly

competitive market. Differentiated and innovative products help our customers improve their

competitiveness and gain market share without the need to lower prices to attract sales.

As their strategic sourcing partner, we are deepening our focus on product expertise, to help our

customers counter margin pressures. Leveraging our scale and scope across a wide range of

product categories, we created product verticals in areas we consider to have high growth

potential. In 2015, we reorganized our internal teams and resources to focus on developing

certain product verticals, initially with furniture, beauty and sweaters, with other verticals to

be established. Our strengthened product expertise enables us to provide our customers with

meaningfully differentiated products, to help them remain competitive in a difficult

retail landscape.

Our multi-channel sourcing platform gives us the flexibility to serve our customers regardless of

their sourcing strategies, enabling us to grow unit volume and gain wallet share in these tough

times. Our extensive global network, strong customer relationships and deep product expertise

across a wide range of categories enable us to provide customers with better and value-added

solutions. Our Vendor Support Services (VSS) further strengthened our relationships with our

suppliers, turning our factories into a new customer base for the Group.

Operating in one of the most demanding business environments in recent history, we are

confident we will continue to help our customers ride through challenging times. Our speed to

market, global connectivity and deep product and industry expertise help us win new accounts

and cement us as the partner of choice in the global consumer goods supply chain.



TURNOVER

Our turnover decreased by 2% year-on-year to US$18.8 billion, largely due to the soft

macroeconomic conditions and challenging retail environment adversely impacting our trading

customers. Our Trading Network was negatively impacted by the continued deflationary

environment caused by price declines in raw materials and commodities. The weakness of

European and Asian currencies has resulted in an unfavorable foreign exchange translation

impact, as 38% of our business operates in non-US markets. This foreign exchange translation

impact alone accounted for approximately two-thirds of the 2% year-on-year decline in our total

turnover. Nevertheless, 2015 saw solid unit volume growth, especially with our core customers.

Our businesses in the e-commerce segment has also increased significantly as our customers

gain market share in e-commerce orders and pure play e-tailers started developing private label

collections.

The US and Europe remained the largest contributors to our turnover, contributing 62% and 17%,

respectively. Our Trading Network contributed 95% of total turnover and our Logistics Network

contributed 5%.

Turnover from the US remained flat at US$11.7 billion as consumer spending on general apparel,

footwear and accessories did not show meaningful improvement despite the significant drop in

oil prices. Our US business was supported by the increase in trading with our core customers,

as well as the gradual ramp up of our business with new customers. Despite the slow recovery

in US retail, our ability to offer customers the flexibility to procure products via our multi-channel

sourcing platform has proven to be the key driver of our unit volume growth, allowing us to

weather the downturn and support our total turnover.

Group Geographical Market TurnoverUS$m

USA

Euro

peAsia

Rest o

f World

11.7

3.12.7

1.3

YoY % +0.6% (0.3%)(10.9%) (9.3%)

US$b

USA

Europe

Asia

Rest of World

6%

15%

17%62%

8%

14%

60%

18%

201518,831

201419,288



Turnover from Europe decreased by 11% to US$3.1 billion. The environment in Europe

continued to be weak; recovery in the European economies was slow and shadowed by growing

concerns over threats of geopolitical instability as well as social and economic repercussions

from Europe’s migrant crisis. The pressure on Eurozone currencies has in turn impacted our

European business from a currency translation perspective.

Asia contributed 15% of our turnover and remained flat at US$2.7 billion due to the slowdown

in China and other Asian economies, as well as a negative foreign exchange translation impact.

Approximately 72% of our turnover from Asia was from our Trading Network and the remainder

from our Logistics Network. The continued growth of our Logistics Network in the region, which

was largely supported by new contracts and geographical expansion within Asia, particularly

into Southeast Asian countries, has provided strong support to our overall Asia business despite

a reduction in turnover in Asia within the Trading Network.

The Rest of World represents approximately 6% of the total turnover, and is mainly comprised

of Canada, Australia, Middle East and Latin America. The reduction of 9% to US$1.3 billion

was largely due to a reduction in orders by our customers in those regions, as well as the

depreciation of local currencies against the US$.



TOTAL MARGIN

Total margin of US$2.2 billion decreased by 2% over 2014 due to reduction in turnover, while the

overall total margin percentage was stable at 11.6%. The lower reported turnover, partly affected

by the negative foreign exchange impact, had a direct impact on our total margin. While our

agency margins remained stable, our principal margins were affected by the highly promotional

retail landscape and downward pressure on retailer’s margins. Our Logistics Network continued

its strong performance, which supported our overall total margin.

OPERATING COSTS

Operating costs increased by 2% year-on-year to US$1.7 billion and operating costs as a

percentage of turnover increased from 8.5% to 8.9%, primarily due to the growth of our logistics

business and annualization of strategic investments made in 2014. These investments included

the expansion of our logistics business, build out of our VSS team, upgrade of group-wide

infrastructure, as well as development of new product categories, markets and services. The

majority of these investments are related to people and rental costs and therefore recurring

in nature. The increase in operating costs from our strategic investments was offset by cost

efficiencies extracted from our existing operations. While the total operating costs increased

by 2% for the year, operating costs in the Trading Network remained flat for the entire year. In

addition, year-on-year total operating costs for the Group was flat in the second half

of 2015, despite the investments made in 2014 and the difficult operating environment during

this period.

CORE OPERATING PROFIT

Core operating profit decreased by 15% year-on-year to US$512 million due mainly to the 2%

reduction in total margin, as well as the 2% increase in operating costs to support our logistics

business expansion. With the continued growth across the Logistics Network, its core operating

profit increased to 10% of the Group’s core operating profit in 2015.

PROFIT ATTRIBUTABLE TO SHAREHOLDERS

Profit attributable to Shareholders decreased by 5% year-on-year to US$421 million, which

included a non-cash gain of US$117 million on the write-back of contingent considerations

(2014: US$176 million). In 2014, our profit attributable to Shareholders included a non-recurring

loss from Discontinued Operations of US$98 million for Global Brands Group operations during

the first half of 2014 prior to the spin-off.



Segment AnalysisTrading NetworkIn our Trading Network, we provide end-to-end sourcing solutions through our global network

for a diverse mix of global brands and retail customers. As a multi-channel sourcing supplier,

we have the unique capability to serve our customers’ business and product needs regardless

of how they source their products; either through our agency-based sourcing services or our

product-focused principal trading solutions over a wide range of consumer products

and categories.

Our agency-based sourcing services, in which we act as a strategic sourcing partner to our

customers under long-term contracts, provide a steady base and represent a significant

part of our Trading Network business. Under our agency sourcing arrangements, we provide

strategic sourcing services to our customers, such as product development and costing, factory

compliance, order processing, manufacturing control and logistics. To enhance our customers’

competitiveness, we also provide trend forecasting, market analysis, industry intelligence, raw

material procurement and strategic insights on the global supply chain to help our customers

procure high quality products with short lead time and speed to market.

In our product-focused principal trading business we act as a principal supplier to our customers,

operating primarily on a merchandise program-by-program basis; where the terms of each order

are mutually agreed on a per program basis. We are continuing to develop our product expertise

and move deeper into product verticals to solidify our leadership position in specific product

categories. The combination of our agency and principal capabilities make Li & Fung the leading

global sourcing supplier, offering both types of services with scale and scope.

The retail landscape has been evolving as it adapts to changes in consumption behavior, advent

of technology and rise of e-commerce and borderless retail. In response to these changing

market conditions with increased competition and margin pressure, our customers are actively

adjusting their supply chain to procure differentiated products at competitive prices to maintain

their market competitiveness. With our multi-channel sourcing platform, we are well positioned

to serve our customers as they optimize their sourcing strategy and stay ahead of the market.



Trading Network Results2015 2014 Change

US$m US$m %

Turnover 17,907 18,431 (2.8%)

Total Margin 1,909 2,004 (4.7%)


Operating Costs 1,449 1,446 +0.2%

Core Operating Profit 460 558 (17.6%)


TURNOVERTurnover of the Trading Network, comprising 62% soft goods and 38% hard goods, decreased

by 3% year-on-year to US$17.9 billion in 2015 in spite of an increase in unit volume during the

year. The decrease in turnover is attributable to the deflationary environment in sourcing prices

and the slowdown in both Europe and Asia. Furthermore, our reported turnover was severely

affected by a negative foreign exchange translation impact resulting from the depreciation of

both European and Asian currencies against the US$. Foreign exchange translation impact

alone accounted for over half of the 3% year-on-year decline in our total turnover within the

Trading Network.

Turnover in our US business remained flat at US$11.5 billion, largely supported by overall trading

unit volume growth, particularly with our core customers. However, such growth was offset by

price reduction due to deflationary prices, which impacted our agency business.

Our European business declined by 11% year-on-year to US$3.1 billion due largely to the

unfavorable foreign exchange translation and the uncertain macroeconomic conditions in

Europe. Our European business is primarily comprised of our principal trading business, which

transacts in the respective local currencies. The depreciation of the Euro and Pound against our

reporting currency during the year had a significant translation impact on our European business

turnover as reported in US$.

Trading Network Geographical Market TurnoverUS$m

8%

17%

11%

64%

8%

19%

11%

62%

USA

Europe

Asia

Rest of World

USA

Euro

peAsia

Rest o

f World

11.5

3.1

2.01.3

YoY % +0.4% (2.5%)(11.0%) (9.3%)

US$b

201517,907

201418,431



Turnover in Asia decreased by 2.5% year-on-year to US$2.0 billion. In particular, our Asian

distribution business suffered from the slowdown in China, geopolitical issues in Southeast Asia

and the Asian currencies depreciation against the US$. Turnover in the Rest of World decreased

by 9% year-on-year to US$1.3 billion due mainly to the overall reduction in orders by our

customers in regions, such as Canada, Australia, the Middle East and Latin America, as well as

foreign currency impact.

Across our Trading Network, we serve a diversified group of customers globally, ranging from

brands, department stores, specialty stores, clubs, hypermarkets and pure play e-commerce

players. Our top five customers, some of which we serve across both our Trading and Logistics

Networks, accounted for 36% of our total Group turnover in 2015. Our customer base has

been evolving, as we overtime increase the proportion of brands, specialty retailers, off-price

discount stores, and an emerging group of pure play e-commerce players. Our core customers

form the foundation of our business, many of whom we serve on both agency and principal-

trading terms. Our relationships with core customers are strategic and long term in nature, with

our sourcing teams fully aligned to our customers’ procurement needs, and working with their

teams closely on a daily basis.

While focusing on our core customers, we are always seeking new business opportunities and

have built a strong prospective customer pipeline. In 2015, we signed a number of significant

contracts for our agency-based services. On the e-commerce sourcing front, we continue to

increase our share of Internet sales as our brands and bricks-and-mortar customers increase

their online sales. In the meantime, pure e-commerce players have begun to establish their

own private label collections and we are well placed to provide such private label services

going forward.

Soft Goods

Hard GoodsTurnover 62% 38%

Product Mix



TOTAL MARGIN

Total margin across the Trading Network decreased by 5% year-on-year to US$1.9 billion as a

result of the decrease in total turnover and continued margin pressure on our principal business.

The negative foreign exchange impact on turnover had a direct corresponding impact on total

margin. Total margin percentage decreased from 10.9% in 2014 to 10.7% in 2015. Total margin

percentage in our service-based agency business remained steady, given stable agency rates

stipulated in the multi-year contracts. Total margin percentage in our principal business was

under pressure as our customers faced their own pricing pressure with changes in the retail

landscape and the need to make adjustments to their supply chains, which typically take time.

The unusually warm winter in 2015, as well as the heavier promotional activities throughout

the year significantly impacted brands and retailers’ gross margins, which also led to margin

pressure throughout the entire supply chain. In response to such margin pressure, we continue

to work closely with our customers to adjust their supply chains and optimize their sourcing

strategies, as well as provide differentiated, innovative and well-designed products to support

higher margins. The establishment of product verticals further enhances our product expertise

and solidifies our leadership position as a principal trading supplier.

Our multi-channel sourcing platform enables us to provide customers with both agency and

principal-trading services. Margin differs between the two sourcing channels. Long-term agency

contracts have lower margins versus the higher program-by-program principal trading margins.

Our overall total margin percentage was negatively impacted by our turnover mix in 2015 which

shifted to slightly more agency service business.

OPERATING COSTSOperating costs in our Trading Network remained relatively flat at US$1.4 billion largely helped

by improved operational efficiencies and productivity despite the annualization of investments

made in 2014.

In 2015, we continued to optimize our operating expenses and deploy resources to support our

growth in new customer accounts, increased unit volumes and enhancement of our product

expertise. At the same time, we continued to streamline our operations and look for process

efficiency and productivity gain to keep total operating costs flat amid the challenging market

conditions. In addition, we continued to invest in the required infrastructure and resources for

VSS.

CORE OPERATING PROFITThe 18% year-on-year decline in core operating profit to US$460 million was attributed to a

decline in turnover of 3% and a decline in total margin of 5%, while operating costs remained

flat year-on-year. Core operating profit margin decreased from 3.0% in 2014 to 2.6% in 2015 as

a result of the decline in total margin percentage from 10.9% to 10.7% and increase in operating

costs percentage from 7.8% to 8.1%.



TOP SOURCING COUNTRIESOur global network covers more than 40 economies, which allows for flexibility when moving

orders from one production country to another to handle capacity constraints and satisfy

customers’ needs. Within this global network, our top three sourcing countries continue to

be China, Vietnam and Bangladesh. While China accounted for over 50% of our sourcing unit

volume, the remaining 40+ countries all have sizable sourcing operations, and we are one of

the largest exporters of the product categories in which we trade in many of these countries.

This comprehensive global network with strong local presence, long operating history and

critical mass is one of our key competitive strengths. As the sourcing landscape continues to

evolve with the decanting of sourcing from China and multiple trade agreements in play, we are

well positioned to scale our existing operations in individual countries to meet our customers’

changing sourcing needs.

Rank 1China

Rank 2Vietnam

Rank 3Bangladesh

Soft Goods

Hard Goods

47% 53%

85%

15%

99%

1%

VENDOR SUPPORT SERVICES

Our VSS unit was formed in the first year of our current Three-Year Plan to tap the huge potential

of converting our factory base of over 15,000 to a customer base for services relating to the

migration of labor intensive production from China to other developing countries. After making

initial investments, pilot programs were launched in selected countries in 2015. We rolled out

our digital vendor portal to connect with all our vendors, launched the bulk purchase programs

in raw materials procurement and product liabilities insurance and developed working capital

management tools and services for our suppliers, as well as initiated various vendor compliance

services. The initial pilot phase in 2015 tracked better than expected and we exceeded our

target of VSS breaking even in 2015 by generating a small profit.



Logistics Network

Our logistics business provides holistic, integrated solutions for our logistics customers through

our in-country logistics and global freight management services. Unlike traditional logistics

service providers, we have deep understanding of our customers’ supply chains and product

flows. Our knowledge and network along the entire global supply chain allow us to offer long-

term collaborative solutions to our customers, making us their logistics partner of choice. We

create value through execution excellence, operational efficiency and service innovation. As an

asset-light operator, we optimize our resource allocation based on customer demand, and we

enhance our flexibility and responsiveness through information technology and network sharing.

Our in-country logistics business offers Asia-focused logistics and supply chain solutions, and

specializes in the key verticals of footwear and apparel, fast-moving consumer goods, food and

beverage, retail and electronics. We have a strong portfolio of blue chip customers, servicing

top-tier firms in our respective verticals. We provide a menu of contract logistics services under

our in-country logistics business, including the traditional distribution center management,

order management, local (including last mile) transportation, as well as more innovative and

sophisticated services, such as hubbing and consolidation, data analytics and e-logistics

fulfillment services.

Our global freight management business offers full service international freight services,

including procurement of international freight, freight consolidation and forwarding, and origin

and destination cross-border logistics services. The scale of this business increased significantly

following the acquisition of China Container Line in 2014. With more than half a million TEUs

of shipping volume, we now offer our customers full container loads or consolidate less-than

container load freight services in a cost effective and competitive manner.

Logistics Network Results2015 2014 Change

US$m US$m %

Turnover 932 874 +6.7%

Total Margin 280 240 +16.4%

Operating Costs 227 194 +16.9%

Core Operating Profit 53 46 +14.6%




TURNOVER

Turnover increased 7% year-on-year to US$932 million, largely driven by new business wins,

geographical expansion and increased market share. This was offset by the substantial drop in

global freight rates especially in the second half of the year, continued softness in global trade

and the devaluation of currencies against the US$. In local currency terms, our logistics business

generated a double-digit increase in total turnover.

Our in-country logistics business contributed the majority of net sales in 2015. This sustained

strong organic growth momentum was driven mainly by new business wins and geographical

expansion. China continued to be our largest market. Despite the slowdown in Asian economies,

which significantly impacted the business flow of our customers, we grew our business by

winning new customers, as well as by expanding services or geographical coverage with existing

customers. This is reflected in the high number of new business contracts we signed during the

year. Our entrance into Korea, Japan and Indonesia also began to generate positive contribution.

Most encouraging of all is our sustained momentum in gaining market leadership in e-logistics,

having achieved a highly successful Singles’ Day operation in China. We continued to focus

on optimizing our network of depots and warehouses, the latest of which is a state-of-the-art

facility in Singapore, which consolidates five warehouses into a one-million-square-foot regional

distribution center.

During 2015, the global freight industry was plagued by an unprecedented decline in freight

rates as a result of overcapacity in carriers, lower oil prices and a slowdown in demand.

Despite these challenges, we have managed the margin impact to our global freight business

through prudent freight procurement and active contract management. Our global freight

management business also gained market share through geographical expansion and successful

cross-selling of our freight services to our Trading Network customers. At the same time, we

continued to upgrade our IT infrastructure to improve efficiency in transport management and

global freight optimization.

CORE OPERATING PROFIT

Core operating profit increased by 15% year-on-year to US$53 million and core operating profit

margin improved from 5.2% to 5.6% in 2015. The improvement in margin was mainly due to our

increased scale, continued focus on optimizing our customer portfolio and productivity through

enhanced operating efficiency.

Logistics Network Geographical Market TurnoverUS$m

China

Rest of Asia

Rest of World

16%

28%

56%

14%

30%56%

US$m

YoY % +6.5% +0.9% +19.8%

263

146

China

Rest o

f Asia

Rest o

f World

523

2015932

2014874



Balance Sheet and Capital StructureStrong Cash Position

Li & Fung has a strong and stable cash flow conversion business which, together with cash on

hand carried forward from the previous year, more than adequately funded our working capital,

dividends, interest expenses and capital expenditure in 2015.

• Operating cash flow of US$544 million is in line with core operating profit after working capital

and depreciation adjustments and tax payments

• Capital expenditures of US$83 million and payments for consideration payable for previous

acquisitions of US$102 million

• Dividends paid of US$445 million

• Net interest expenses paid of US$83 million, and distribution to perpetual capital securities

holders of US$30 million

In terms of future commitments, the remaining balance of total purchase consideration payable

for acquisitions was reduced to US$243 million by the end of 2015, of which US$181 million are

earn-out payments to be paid over the course of the next three years. Our ongoing total capital

expenditures are mainly comprised of IT system upgrades, expansion of our logistics business

and ongoing maintenance capital expenditures, while we remain asset-light.



Solid Balance Sheet

Our balance sheet remained strong with a cash position of US$342 million, after payment of

2014 final and special dividends and 2015 interim dividend. Our total borrowing remained stable

at US$1,450 million as of 31 December 2015, with a weighted average tenure of over three

years. The majority of our debt is at a fixed rate and denominated in US dollars. Our net debt

(total borrowings minus cash) was at US$1,107 million as of 31 December 2015.

539

342

1,434 1,450

Cash Gross Debt

Dec 20

15

Dec 20

15

Dec 20

14

Dec 20

14

1,450342

1,107

Gross DebtCash

Net Debt

0

600

300

900

1,200

1,500

Cash and Gross DebtUS$m

Debt Maturity ScheduleUS$m

599

755

499

100

96

0

200

400

600

800

2017

2016

2020

Bonds

Bank Loans



Net Gearing and Net Current Assets

Our net gearing ratio as stated in the audited consolidated balance sheet was 27% as of

31 December 2015 (31 December 2014: 22%).

We continued to adopt a conservative approach in managing our balance sheet and capital

structure. As at 31 December 2015, our credit ratings from Moody’s is Baa1 (stable outlook) and

Standard & Poor’s is BBB+ (stable outlook). We are committed to maintaining a solid balance

sheet, healthy cash flow and strong credit ratios, with the overall long-term target of retaining

an investment grade rating to support our growth.

Our current ratio as stated in the audited consolidated balance sheet was 1.0 as at

31 December 2015.

Credit Rating

Moody’sBaa1

Stable Outlook

S&PBBB+

Stable Outlook

Net Gearing Ratio

Dec 20

14

Dec 20

15

InternalGuideline

35%

27%

22%



Banking FacilitiesBank Loans and Overdrafts

As at 31 December 2015, we had available bank loans and overdraft facilities of US$1,670

million comprising US$821 million committed and US$849 million uncommitted facilities. At the

end of 2015, US$196 million of our bank loans and overdraft facilities were drawn down, with

US$168 million from committed facilities. The unused limits on bank loans and overdraft facilities

amounted to US$1,474 million and this included US$653 million unused committed facilities.

In early 2016, we successfully secured additional committed facilities with extended tenure.

At the date of this Report, the total committed facilities increased to US$876 million, of which

US$726 million were revolving facilities with tenure up to three years due in 2019, while the total

available bank loans and overdraft facilities remained at US$1,670 million.

Trade Finance

Our normal trading operations are well supported by approximately US$2.5 billion in bank

trading facilities including mainly letters of credit issued to suppliers and bills discounting.

Letters of credit are a common means of payment to suppliers to support cross-border trades.

Our payment obligations on letters of credit issued to suppliers is only crystalized when our

suppliers have delivered the merchandise to our customers, or to us, in accordance with the

terms and conditions specified in the related contractual documents. As at 31 December 2015,

approximately 22% of the trade facilities were used.

Unused Bank LoansUS$m

Comm

itted

Uncom

mitt

edTo

tal

653

821

168

821

849

28

1,670

1,474

196

Used

Unused



Contingent Liabilities and GoodwillAdjustments to Purchase Consideration Payables

Given the unique nature of our acquired businesses, which are private enterprises relying on

their respective entrepreneurs’ commercial skills to drive their success; we generally structure

our acquisitions with incentive schemes and contingent payments on purchase consideration

payables linking to the future performance of the acquired businesses.

We follow a stringent internal financial and accounting policy in evaluating potential adjustment

to the estimated fair value of purchase consideration payable in accordance with the accounting

standard HKFRS 3 (Revised) “Business Combination.”

Our contingent consideration payables are performance-based payments in the form of

“earn-out” and “earn-up” payments depending on a set of predetermined performance targets

mutually agreed with the entrepreneurs in accordance with the sale & purchase agreement.

Earn-out payments are generally payable within three to four years upon completion of

a transaction.

Earn-up payments have a high performance target threshold and are typically payable over

a period of up to five to six years upon completion of a transaction if earned.

While many of our acquired businesses remain profitable and are growing, we may still be

required to make a downward fair value adjustment to certain consideration payable should the

acquired businesses be unable to achieve the predetermined performance threshold within the

specific timeframe as stipulated in the sale & purchase agreement. Given that the contingent

consideration entitlement is usually contractual in nature and is based on a specific formula

linking to a particular threshold, the underlying business performance of the acquired businesses

could continue to perform and grow, yet we may still be required to adjust the consideration

payable, especially if the high performance thresholds of earn-ups are not reached. For the year

ended 31 December 2015, there are approximately US$117 million of write-back of contingent

considerations, the majority of which are in the form of earn-ups.



Goodwill Impairment Tests

We performed goodwill impairment tests based on the cash generating units (CGU) which

manage the acquired businesses in accordance with HKAS 36. Based on our assessment of all

of the CGUs under the current operating structure, we have determined that there is no goodwill

impairment as of 31 December 2015, as the recoverable amount of each CGU was in excess of

its respective carrying value of the goodwill. We will continue to perform goodwill impairment

tests on an ongoing basis.

Risk ManagementWe have strict policies governing accounting control, credit and foreign exchange risk and

treasury management.

Credit Risk Management

Credit risk mainly arises from trade and other receivables. Our principal trading business carries

a higher credit risk profile given we are acting as a supplier and we therefore have to take full

counterparty risk of our customers in terms of accounts receivable and inventory. With the

increased insolvency risk among global brands and retail customers, we have deployed a global

credit risk management framework with tightened risk profile, and applied prudent policies to

manage our credit risk with such receivables, which include, but are not limited to, the measures

set out below:

• We select customers in a cautious manner. Our credit control team has implemented a

risk assessment system to evaluate the financial strength of individual customers prior to

agreeing on trade terms. It is not uncommon for us to require securities (such as standby

or commercial letters of credit, or bank guarantees) from customers who fall short of the

required minimum score under our risk assessment system

• A significant portion of trade receivable balances are covered by trade credit insurance or

factored to external financial institutions on a non-recourse basis

• A credit risk system with a dedicated team and tightened policies has been established to

ensure on-time recoveries from trade debtors

• Rigid internal policies which govern provisions made for both inventories and receivables

are in place to motivate business managers to step up their efforts in these two areas and

to avoid any significant impact on their financial performance



Foreign Exchange Risk Management

Most of our cash balances are deposits in HK$ and US$ with major global financial institutions,

and most of our borrowings are denominated in US$.

Our revenues and payments are transacted mainly in the same currency, and are predominantly

in US$. Therefore, we do not believe there is significant risk exposure in relation to foreign

exchange rate fluctuations. There are small portions of sales and purchases transacted

in different currencies for which we arrange hedging by means of foreign exchange

forward contracts.

For transactions subject to foreign exchange risk, we fully hedge our foreign currency exposure

once we receive confirmed orders or enter into customer transactions. To mitigate the impact

from changes in foreign exchange rates, we regularly review our operations in these selected

countries and make necessary hedging arrangements in certain currencies against the US$.

However, we do not enter into foreign currency hedges with respect to the local financial

results and long-term equity investments of our non-US$ foreign operations for both our income

statements and balance sheet reporting purposes. Since our functional currency is in US$,

we are subject to exchange rate exposure from translation of foreign operations’ local results to US$

at average rate for the period for group consolidation. Our net equity investments in non-US$

denominated businesses are also subject to unrealized translation gain or loss on consolidation.

Fluctuation of relevant currencies against the US$ will result in unrealized gain or loss from time

to time, which is reflected as movement in exchange reserve in the consolidated statement of

changes in equity.

From a medium to long-term perspective, we manage our operations in the most cost effective

way possible within our global network. We strictly prohibit any financial derivative arrangement

merely for speculation.

PeopleAs an asset-light business, our success is overwhelmingly dependent on our people. We are

very proud of and grateful for their expertise, dedication and hard work. As at 31 December

2015, we have a total workforce of 25,320, of which 7,106 are warehouse related workers for

our logistics and distribution businesses. In terms of geography, 4,251 of our people were based

in Hong Kong, 9,282 were based in Mainland China and 11,787 were based overseas.

Total manpower costs for 2015 were US$1,025 million, compared with US$995 million for 2014,

with the majority of the increase due to share awards granted to employees during the year,

as well as from expansion in our logistics business.



OutlookWe expect 2016 to be a challenging year given little indication of a turnaround of the global

economy and retail sector in the near term. We believe the trading environment will remain

weak while deflationary pressure will increase. The retail landscape is likely to remain clouded

by a promotional environment, geopolitical instability and unpredictable weather patterns. In the

meantime, we will continue to gain market share from existing customers, continue cross-selling

within the Group, cultivate new accounts and improve productivity and operational efficiencies.

Our current pipeline of opportunities is strong and we are targeting for more new customer

wins this year. Through the ongoing development of our product verticals and the incubation

of product categories with growth potential, we will further deepen our product expertise and

deliver value to our customers. We also expect the contribution from VSS to grow over the

next few years as our suite of services is gradually developed and rolled out. VSS is targeted to

contribute 5% of our core operating profit in 2016, and gain greater traction in the coming years.

We expect our logistics business will continue to deliver strong growth as it continues to capture

market share through e-logistics, cross border freight and value-added services. Global freight

rates are expected to remain subdued due to the imbalance between supply and demand as

well as overcapacity, which is unlikely to be resolved in the near future. Nonetheless, we will

continue to focus on our strengths in executing our strategy, and supporting the needs of our

customers. We will continue to deepen our relationships with our existing core customers, and

nurture relationships with new customers, with the goal of growing their sales.

We are focused on investing into the future through partnership opportunities to collaborate on

innovation in technology and data analytics. Our new presence in Silicon Valley demonstrates

our commitment to innovation, and we will continue to experiment and develop high-quality

products that are differentiated and to suit the continuous changing consumers’ preferences.


Our commitment to good governanceWe are committed to the principles of transparency, accountability and independence to enhance shareholder value.


Our commitment to good governance

The Board and management are committed to principles of good corporate governance consistent with prudent management and enhancement of shareholder value. These principles emphasize transparency, accountability and independence.

The BoardBoard Composition

The Board is currently composed of three Executive Directors, one Non-executive Director and

four Independent Non-executive Directors. While the Board considers that this composition

remains balanced and able to reinforce a strong independent review and monitoring function

of overall management practices, the Board has taken steps to identify additional Independent

Non-executive Directors with due regard for the benefits of diversity on the Board. Directors’

biographical details and relevant relationships are set out in “Our board and management team”

on pages 60 to 69.

List of Directors and their Roles and Functions

Executive Directors

Non-executive Director

Independent Non-executive Directors

William Fung Kwok LunGroup Chairman- Member of Nomination Committee- Member of Risk Management

and Sustainability Committee

Spencer Theodore FungGroup Chief Executive Of�cer- Member of Risk Management


Marc Robert Compagnon- Member of Risk Management


Victor Fung Kwok KingHonorary Chairman- Chairman of Risk Management

and Sustainability Committee- Member of Remuneration Committee

Margaret Leung Ko May Yee- Chairman of Audit Committee

Paul Edward Selway-Swift- Chairman of Nomination Committee- Member of Audit Committee

Allan Wong Chi Yun- Chairman of Remuneration Committee- Member of Audit Committee- Member of Risk Management

and Sustainability CommitteeMartin Tang Yue Nien- Member of Nomination Committee- Member of Audit Committee- Member of Remuneration Committee


Our commitment to good governance (continued)

Board Diversity

We believe board diversity enhances decision-making capability, allowing for different

perspectives, and that a diverse board has both the breadth and depth of skills and experience

to steer and oversee the dynamic and emerging business of the Group. We recognize that board

diversity is a vital contributing element to the sustainable development and growth of the Group.

This also promotes the interests of all our stakeholders, particularly the long-term interests of

our Shareholders, fairly and effectively.

The Board adopted a Board Diversity Policy in 2013 which sets out the approach to diversify the

Board. Under the Policy, the Nomination Committee reviews and assesses Board composition

on behalf of the Board and recommends the appointment of a new Director when necessary.

In designing the Board’s composition, the Nomination Committee considers a number of

aspects, including but not limited to gender, age, cultural and education background, ethnicity,

professional experience, skills, knowledge and length of service. The Nomination Committee will

also consider factors based on the Group’s business model and specific needs from time to time

in determining the optimum composition of the Board.

Board members have a broad range of experience and business and management skill sets

across different industries, including, but not limited to, supply chain management, banking and

finance, talent management, leadership, risk management, global business and marketing.

Visit our website to read our Board Diversity Policy.

Gender

65

>65

Age

<

Length of Board Service

0-10 years

Above 10 yearsNon-executive DirectorIndepandent Non-executiveDirectors

Executive DirectorsNED:INED:

ED:

ED

INED

NED

Designation



Group Chairman and Group Chief Executive Officer

The role of the Group Chairman remains separate from that of the Group Chief Executive

Officer to enhance their respective independence, accountability and responsibility.

Their responsibilities are clearly established and defined in writing by the Board.

Group Chairman • Responsible for ensuring the Board is functioning properly,

with sound corporate governance practices and procedures

Group Chief

Executive Officer

• Responsible for managing the Group’s business, including the

implementation of strategy and initiatives, with the support of

Executive Directors and senior management, and within those

authorities delegated by the Board

Roles and Responsibilities of the Board

The Board is responsible for setting the overall value, standards and strategy of the Group

as well as reviewing its operation and financial performance.

The Non-executive Directors (the majority of whom are independent) bring diverse industry

expertise and advise management on strategy, ensure that the Board maintains high standards

of financial and other mandatory reporting requirements, and provide adequate checks and

balances to safeguard the interests of Shareholders and the Company as a whole.

Matters Reserved for Decision or Consideration by the Board

While specific functions are delegated to Board Committees and day-to-day operations to

management, matters which have a critical bearing on the Company are specifically reserved

for decision or consideration by the Board, including:

• Directors’ appointments, reappointments and removals

• Constitution, composition and terms of reference of Board Committees

• Overall Group strategy

• Major acquisitions and disposals

• Appointment of the Group Chairman and Group Chief Executive Officer

• Annual budgeting and monitoring of performance against budget

• Annual and interim reports

• Major financing arrangements or commitments

• Oversight of risk management and internal control systems and reviewing their effectiveness

and ensuring relevant statutory and regulatory compliance

• Any significant operational and financial matters

• Any major corporate governance issue



Delegation to Management

Operational responsibilities delegated by the Board to management, include:

• Preparation of the annual and interim financial statements for Board approval before

public reporting

• Execution of business strategies and initiatives adopted by the Board

• Monitoring of operating budgets adopted by the Board

• Implementation of adequate systems of risk management and internal control

• Compliance with relevant statutory requirements, rules and regulations

Board Evaluation

The Board recognizes the importance and benefit of conducting regular evaluations of its

performance to ensure effectiveness. Since 2013, an annual questionnaire is sent to each

Director seeking views on the overall performance of the Board, its composition, conduct of

Board meetings and provision of information. The responses are analyzed and discussed by

the Board and suggestions are incorporated to improve corporate governance. The results

of the 2015 Board evaluation indicated that the Board and its Committees are functioning

satisfactorily. While the Directors are satisfied that the Board and its Committees have the right

mix of expertise, experience and skills, they have also made constructive suggestions to further

enhance Board composition.

Independence of Non-executive Directors

Each year the Board receives written confirmation from each Independent Non-executive

Director of their independence and is satisfied of their independence for 2015. This assessment

of the independence follows the terms set out in Chapter 3 of the Listing Rules and is delegated

by the Board to the Nomination Committee.

Independent Non-executive Directors are required to inform the Company if there is any change

that may affect his/her independence.

Appointment and Re-election of the Directors

The appointment of a new Director must be approved by the Board. The Board has delegated

to the Nomination Committee the responsibility to select and recommend candidates for

directorship. The Nomination Committee has established guidelines to assess the candidates

in line with the Board Diversity Policy. The guidelines emphasize appropriate professional

knowledge and industry experience, personal ethics, integrity and personal skills, and possible

time commitments to the Board and the Company, and other forms of diversity such as gender,

ethnicity and age.



The Company may in general meeting by ordinary resolution of the Shareholders elect any

person to be a Director, either to fill a vacancy or to act as an additional Director up to the

maximum number of Directors as determined by the Shareholders. If a Shareholder wishes

to propose a person for election as a Director at the general meeting convened to deal

with appointment/election of Director(s), he/she must serve a written notice and follow the

designated procedures which are subject to the Bye-laws of the Company, the relevant laws

and the Listing Rules. Details of the procedures for nomination of Directors by Shareholders

are available on our website.

Except for Paul Edward Selway-Swift, an Independent Non-executive Director, who has stood for

re-election for a term of around one year at each annual general meeting since 2013, all other

Non-executive Directors were appointed for a term of three years and all Directors are subject

to retirement by rotation and re-election at annual general meetings. Under the Company’s

Bye-laws, one-third of the Directors, who have served longest on the Board, must retire and be

eligible for re-election at each annual general meeting, provided that each Director is subject to

retirement by rotation at least once every three years. In addition, any Director appointed by the

Board, either to fill a casual vacancy or as an addition to the existing Board, shall hold office only

until the following annual general meeting and then be eligible for re-election.

To further reinforce accountability, any further reappointment of an Independent Non-executive

Director who has served the Board for more than nine years will be subject to separate

resolution to be approved by Shareholders.

Induction and Ongoing Development

The Directors are encouraged to participate in professional development to enhance and refresh

their knowledge and skills for discharging their duties and responsibilities.

All Directors were informed on a timely basis of major changes that may have affected the

businesses, including relevant rules and regulations. Since 2003, we have implemented an

annual Board training program to update the Directors (in particular Independent Non-executive

Directors) on the macroeconomics, business environment and regulatory requirements relevant

to our operations. Board meetings outside of Hong Kong, coupled with briefings and office tours

have been conducted since 2004. In 2015, a Board meeting and briefing was conducted in India

with a visit to our sourcing office in New Delhi.

In addition, each newly-appointed Director receives a tailored induction program that includes

an overview by the Group Chairman and meetings with management and the Company’s

external legal advisor on Directors’ legal role and responsibilities.

All Directors are required to provide their training records annually. For 2015, all Directors

attended the arranged training sessions and gave, or attended, speeches at external seminars/

training sessions.



Independent Reporting of Corporate Governance Matters

The Board recognizes the importance of independent reporting of corporate governance

matters. The Group Chief Compliance and Risk Management Officer, as appointed by the Board,

was invited to attend Board and committee meetings in 2015 to advise on corporate governance

matters covering risk management and relevant compliance issues relating to business

operations, mergers and acquisitions, accounting and financial reporting.

To further enhance communication between the Group Chairman and the Non-executive

Directors, four separate meetings were held in 2015 without other Executive Directors present.

Written procedures are also in place for Directors to seek independent professional advice in

performing their duties at the Company’s expense. No requests for independent professional

advice were made in 2015.

Liability Insurance for the Directors

Details of liability insurance to indemnify the Directors for their liabilities arising out of corporate

management activities are disclosed in the Report of the Directors on page 120.

Board and Committee Meetings

Regular Board and Board Committee meetings are scheduled a year in advance to facilitate

maximum attendance. The agenda is set by the Group Chairman in consultation with members

of the Board and the Committee meeting agendas are set by the respective Committee

chairman. Senior management is typically invited to join Board meetings to enhance

communication. The external auditor attended the 2015 annual general meeting to answer

any questions from Shareholders on the audit of the Company.

In 2015, the Board held five meetings (with an average attendance rate of 98%). A summary

of the Board and Committee composition, and meetings held in 2015, is below.

The Board and Shareholders

Shareholders

The Board

NominationCommittee

AuditCommittee

RemunerationCommittee

Risk Management& Sustainability

Committee Indepandent Non-executive Directors

Non-executive Director

Executive Directors

Group Chief Compliance and Risk Management Of�cer



Board and Committee Meetings for Year 2015 – Number of Meetings Attended/Held

BoardNomination Committee

Audit Committee

Risk Management

and Sustainability

CommitteeRemuneration

Committee

Annual General Meeting

Victor Fung Kwok King 1 5/5 2/2 N/A 4/4 2/3 1/1

Paul Edward Selway-Swift 2 5/5 4/4 4/4 N/A N/A 0/1

Allan Wong Chi Yun 3 5/5 N/A 4/4 4/4 3/3 1/1

Franklin Warren McFarlan 4 3/3 2/2 2/2 N/A 2/3 1/1

Martin Tang Yue Nien 5/5 4/4 4/4 N/A 3/3 1/1

Margaret Leung Ko May Yee 5 4/5 N/A 4/4 N/A N/A 1/1

William Fung Kwok Lun 6 5/5 4/4 N/A 4/4 N/A 1/1

Spencer Theodore Fung 7 5/5 N/A N/A 4/4 N/A 1/1

Marc Robert Compagnon 5/5 N/A N/A 4/4 N/A 1/1

Srinivasan Parthasarathy 8 3/310 2/210 2/210 2/2 2/210 0/1

Jason Yeung Chi Wai 9 2/210 2/210 2/210 2/2 1/110 N/A

Average Attendance Rate 98% 100% 100% 100% 89% 89%

Dates of Meetings 8/1/201519/3/201521/5/201520/8/201516/11/2015

18/3/201520/5/201519/8/201516/11/2015

18/3/201520/5/201519/8/201516/11/2015

21/1/201514/4/20154/8/201514/10/2015

18/3/201520/5/201516/11/2015

21/5/2015

1. Honorary Chairman, and Chairman of the Risk Management and Sustainability Committee. Resigned as a member of the Nomination Committee with effect from 21 May 2015

2. Chairman of the Nomination Committee

3. Chairman of the Remuneration Committee

4. Retired by rotation as an Independent Non-executive Director of the Company with effect from 21 May 2015, and accordingly ceased to be a member of the Nomination,

Audit and Remuneration Committees

5. Chairman of the Audit Committee

6. Chairman of the Board

7. Group Chief Executive Officer

8. Resigned as Group Chief Compliance Officer and as a member of the Risk Management and Sustainability Committee on 1 July 2015

9. Appointed as Group Chief Compliance and Risk Management Officer and as a member of the Risk Management and Sustainability Committee on 1 July 2015

10. Attended Board and Committee meetings as a non-member



Board CommitteesThe Board has established the following committees (all chaired by an Independent Non-executive

Director or a Non-executive Director) with defined terms of reference (available on our corporate

website), which are in line with the Corporate Governance Code of the Listing Rules:

• Nomination committee

• Audit committee

• Risk management and sustainability committee

• Remuneration committee

Each Committee has authority to engage outside consultants or experts as it considers

necessary to discharge its responsibilities. Minutes of all committee meetings are circulated

to all Board members. To further reinforce independence and effectiveness, since 2003, all

Audit Committee members are Independent Non-executive Directors, and the Nomination and

Remuneration Committees have been structured with a majority of Independent Non-executive

Directors as members. Details and reports of the Committees are below.

In 2015, the terms of reference of the Audit Committee and the Risk Management and

Sustainability Committee were updated to ensure full compliance with the new provisions in

the Corporate Governance Code, in particular the incorporation of risk management,

effective from 1 January 2016.

Nomination Committee

The Nomination Committee was established in 2001 and has been chaired by an Independent

Non-executive Director since 2011. Its terms of reference cover recommendations to the

Board on the appointment of Directors, evaluation of Board composition, assessment of the

independence of Independent Non-executive Directors, the management of Board succession,

identification of suitably qualified individuals to become Board members, selecting or making

recommendations to the Board on the selection of individuals nominated for directorships,

and monitoring the training and continuous professional development of Directors and

senior management.



The Committee met four times in 2015 (with an attendance rate of 100%) and was responsible for:

• Reviewing the structure, size, composition and balance of the Board, including diversity, the

retirement of Directors by rotation, the reappointment of retiring Directors at the 2015 annual

general meeting and the nomination of Directors to fill Board vacancies in 2015

• Assessing the independence of Independent Non-executive Directors

• Monitoring the training and continuous professional development of Directors and

senior management

Audit Committee

The Audit Committee was established in 1998 to review the Group’s financial reporting, internal

controls and corporate governance issues and make relevant recommendations to the Board.

The Committee has been chaired by an Independent Non-executive Director since 2003 and

all Committee members are Independent Non-executive Directors. The Committee includes

members with appropriate accounting or related financial management expertise as required

under the Listing Rules.

The Audit Committee met four times in 2015 (with an attendance rate of 100%) to review,

with management and the Company’s internal and external auditors, the internal controls and

financial matters as set out in the Committee’s written terms of reference and make relevant

recommendations to the Board.

In 2015, the Committee’s review covered:

• The audit plans and findings of internal and external auditors

• The external auditor’s independence and performance, provision of non-audit services by

our external auditor

• The Group’s accounting principles and practices, goodwill assessment, Listing Rules and

statutory compliance, connected transactions, risk management and internal controls,

treasury and financial reporting matters (including the interim and annual financial reports for

the Board’s approval)

• Updates on the new changes to the Corporate Governance Code and the respective

responses of the Company

• Emerging risks (particularly credit, global tax regime, anti-corruption, ethical culture and

cyber security) facing the Group

• Enhancements of global credit control framework

• Adequacy of resources, qualifications and experience of employees of the Group’s accounting

and financial reporting team as well as its training programs and budget



Following international best practices, the Committee conducts a regular review of its

effectiveness by completing a detailed audit committee best practices checklist to review its

current practices. Similar self-assessment exercises have been conducted every two years

since 2005. Based on the latest results of these assessments, the Committee believes it is

functioning effectively.

WHISTLEBLOWING ARRANGEMENTS

The Audit Committee also ensures that proper whistleblowing arrangements are in place so

that employees can report any concerns, including misconduct, impropriety or fraud in financial

reporting matters and accounting practices, in confidence and without fear of recrimination,

for a fair and independent investigation and the appropriate follow-up action. Under our

Guidelines on Whistleblowing/Reporting of Concerns, employees can report these concerns

to either senior management or the Group Chief Compliance and Risk Management Officer.

Any Shareholders or stakeholders can also report similar concerns by writing in confidence

to our Group Chief Compliance and Risk Management Officer.

All concerns reported under our whistleblowing guidelines are handled confidentially. We

support those who in good faith report genuine concern on potential or actual breaches of the

Company’s Code of Conduct and Business Ethics and any possible improprieties in any matters

related to the Group. We do not tolerate any kind of retaliation against those who raise genuine

concerns or participate in the investigation.

In 2015, no incidents of fraud or misconduct were reported from employees, Shareholders

or stakeholders that had a material effect on the Company’s financial statements or

overall operations.

EXTERNAL AUDITOR’S INDEPENDENCE

To further enhance independent reporting by the external auditor, part of our Audit Committee

meetings were attended only by the Committee and the external auditor. The Committee also

has unrestricted access to the external auditor as necessary.

A policy on the provision of non-audit services by the external auditor has been established

since 2004. Under this policy, certain specified non-audit services are prohibited and other

non-audit services require prior approval of the Audit Committee if the fee exceeds certain

pre-set thresholds. These permitted non-audit services may be engaged only if they are more

effective or economical than those available from other service providers and will not constitute

adverse impact on the independence of the external auditor. In 2015, the external auditor

provided permitted non-audit services mainly in financial reporting system enhancement

and tax compliance services. The nature and ratio of annual fees to the external auditor for

non-audit services and for audit services in 2015 have been scrutinized by the Audit Committee

(refer to details of fees to auditor in Note 4 to the financial statements on page 161).



The external audit engagement partner is also subject to periodical rotation of not more than

seven years. In addition, we have adopted the policy that subject to prior approval by the Audit

Committee, no employees or former employees of the external auditor can be appointed as

a Director or senior executive of the internal audit or finance division of the Group, within

12 months of his/her employment by the external auditor.

Prior to the commencement of the audit of 2015 financial statements, the Committee received

written confirmation from the external auditor as to its independence and objectivity as required

by the Hong Kong Institute of Certified Public Accountants.

Members of the Committee have been satisfied with the findings of their review of the audit fees,

process and effectiveness, independence and objectivity of PricewaterhouseCoopers (PwC) as the

Company’s external auditor and the Committee has recommended to the Board the reappointment

of PwC in 2016 as the Company’s external auditor at the forthcoming annual general meeting.

Risk Management and Sustainability Committee

The Risk Management and Sustainability Committee was established in 2001 and is chaired by

the Honorary Chairman. Its written terms of reference include offering recommendations to the

Board on the Group’s risk management and internal control systems, and review of its practices

and strategies on corporate responsibility and sustainability. The Committee reports to the

Board in conjunction with the Audit Committee.

The Risk Management and Sustainability Committee met four times in 2015 (with an attendance

rate of 100%) and reviewed the following:

• Risk management procedures pertinent to the Group’s significant investments and operations

• Receivables management, credit risk management, inventory management, goodwill

assessment, tax compliance issues, litigation exposures, post-acquisition integration, other

operational and financial risk management

• Significant non-compliance with our policies and Code of Conduct and Business Ethics as well

as corporate responsibility and sustainability

In addition to this review scope, over 2015, the Committee specifically discussed:

• Revamped credit control framework

• Controls on use of factories with potential health and safety hazards

• Expectations of international unions and NGOs on retailers and brands on labor protection

in evolving countries, and the implication to the Group

• Enhancement of control on payments to vendors

• Case of an employee’s non-compliance with Group’s conflict of interest policy

• Revision to the Li & Fung Supplier Code of Conduct and accompanying Standards,

including the Subcontracting Standard against unauthorized subcontracting



Remuneration Committee

The Remuneration Committee was formed in 1993 and is chaired by an Independent

Non-executive Director. The Committee’s responsibilities as set out in its terms of reference

include making recommendations to the Board on the remuneration policy for all Directors and

senior management, including the granting of Share Options and Award Shares to employees

under the Company’s share option schemes and Share Award Scheme, and determining the

remuneration packages of individual Executive Directors and senior management.

The Committee met three times in 2015 (with an 89% attendance rate) to review and determine

all Executive Directors’ and senior management’s remuneration packages and the granting of

Share Options and Award Shares under the current Three-Year Plan 2014–2016.

Details of Directors’ and senior management’s emoluments of the Company are set out in

Note 10 to the financial statements on page 165 and Note 40 to the financial statements

on pages 208 to 211.

REMUNERATION POLICY FOR EXECUTIVE DIRECTORS AND SENIOR MANAGEMENT

The primary goal of the remuneration policy on executive remuneration packages is to

enable Li & Fung to motivate its Executive Directors and senior management by linking their

compensation to performance with reference to corporate and operating groups’ objectives.

Under the policy, a Director or a member of senior management is not allowed to approve

his/her own remuneration.

The principal elements of Li & Fung’s executive remuneration package include:

• Basic salary

• Bonus

• Share Options and Award Shares granted under long-term incentive schemes,

i.e. share option schemes and Share Award Scheme, adopted by the Shareholders

In determining guidelines for each compensation element, the Committee benchmarks the

remuneration mix to market surveys. All Executive Directors’ and senior management’s

remuneration packages were approved by the Remuneration Committee at the beginning

of the current Three Year Plan 2014–2016.

Basic Salary

Li & Fung conducts periodic reviews of the basic salary of all employees (including Executive

Directors and Senior Management) with reference to various factors like remuneration strategy,

market pay trends and employee salary levels. The Group also determines the basic salary

based on the performance of the Group, business unit and individual employee.



Bonus

Li & Fung implements a bonus scheme for each Executive Director and senior management.

Under this scheme, the computation of bonus is based on measurable performance

contributions and/or performance standards of operating groups headed by the respective

Executive Directors and senior management.

Share Options and Award Shares

The Remuneration Committee recommends for Board approval all grants of Share Options

and Award Shares under long-term incentive schemes, i.e. share option schemes and Share

Award Scheme. The vesting of Share Options and Award Shares granted under the share option

schemes and Share Award Scheme is subject to satisfaction of prescribed criteria of service

length. The purpose is to align the interest of eligible persons of the Group through ownership

of Shares, dividends and other distributions paid on Shares and/or increase in value of Shares

and to encourage and retain eligible persons to make contributions and long-term growth and

profit of the Group.

REMUNERATION POLICY FOR NON-EXECUTIVE DIRECTORS

The remuneration, comprising Directors’ fees, of Non-executive Directors is subject to regular

assessment with reference to such fees paid by Hang Seng Index constituent stocks and

a recommendation by the Remuneration Committee for Shareholders’ approval at the annual

general meeting.

Reimbursement is allowed for out-of-pocket expenses incurred in connection with the

performance of their duties, including attendance at Company meetings.

Company SecretaryThe Company Secretary reports to the Group Chairman on Board governance matters and is

responsible for ensuring that Board policies and procedures are followed. All Board members

have access to her advice and services. She arranges the comprehensive and tailored

induction program for new Directors prior to their appointment and provides timely updates

to the Directors on relevant new legislation or regulatory requirements. Director training has

been organized on a regular basis by the Company Secretary to assist Directors’ continuous

professional development. In 2015, the Company Secretary undertook over 15 hours of

professional training to update her skills and knowledge. Biographical details of the Company

Secretary are in “Our board and management team” on pages 60 to 69.

Market RecognitionThe Group’s continuous commitment to excellence and high standards in corporate governance

practices continued to earn market recognition from stakeholders including bankers, analysts

and institutional investors.

Visit our website to read about our awards and recognition.



Directors’ and Relevant Employees’ Securities TransactionsThe Company has adopted stringent procedures governing Directors’ securities transactions

in compliance with the Model Code. Relevant employees who are likely to be in possession of

unpublished price-sensitive information (“Inside Information”) of the Group are also subject to

compliance with written guidelines in line with the Model Code. For 2015, specific confirmation

of compliance has been obtained from each Director. No incident of non-compliance by

Directors and relevant employees was noted in 2015.

Inside Information Procedures and Internal Controls

With respect to procedures and internal controls for the handling and dissemination of inside

information, we have:

• Established a Policy on Inside Information to comply with our obligations under the SFO and

the Listing Rules

• Included in our Code of Conduct and Business Ethics a prohibition of unauthorized use of

confidential or inside information, including the trading of Company’s securities

• Established procedures for responding to external enquiries about Group’s affairs. Designated

persons from senior management of the Group and the Investor Relations and Corporate

Communication teams are identified and authorized to act as the Company’s spokespersons

and respond to enquiries in allocated areas of issues

Directors’ and Senior Management’s Interests and Financial Relationship Between DirectorsDetails of Directors’ interests in the Shares of the Company are set out in the Report of

the Directors section on pages 120 to 122. The Shares held by each member of senior

management are less than 2% of the issued share capital for the year ended 31 December 2015.

Directors’ Responsibility for Financial Statements and Auditor’s ResponsibilityThe Directors’ responsibility for preparing the financial statements is set out on page 123, and

the auditor’s reporting responsibility is on page 124.

Compliance with the Corporate Governance CodeThe Board has reviewed the Company’s corporate governance practices and is satisfied that it

has been in full compliance with all of the code provisions set out in the Corporate Governance

Code and Corporate Governance Report in Appendix 14 of the Listing Rules throughout the year

ended 31 December 2015.



Shareholders’ RightsThe Company strives to provide equal, regular, timely and effective communication and

dissemination of material information to Shareholders and other stakeholders. The Company

also encourages participation of Shareholders in annual general meetings and other general

meetings. The Company sends notice to Shareholders for annual general meetings at least

20 clear business days before the meeting and at least 10 clear business days for all other

general meetings.

Under the Company’s Bye-laws, in addition to regular Board meetings, the Board, on the

requisition of Shareholders holding not less than 10% of the paid-up capital of the Company,

can convene a special general meeting to address specific issues within 21 days from the date

of deposit of written notice to the registered office of the Company. The same procedure also

applies to any proposal to be tabled at Shareholders’ meetings for adoption.

A Shareholder can also propose a person for election as a Director at the general meeting

convened to deal with appointment/election of Director(s), and he/she must follow the

designated procedure. The nomination procedure for nomination of Directors by Shareholders

is available on our website.

To further enhance minority Shareholders’ rights, since 2003, we have adopted the policy

of voting by poll for all resolutions put forward at the annual general meeting and special

general meeting. To ensure Shareholders are familiar with the process, detailed procedures

for conducting a poll are explained at the commencement of the general meetings, and all

questions from Shareholders on the voting procedures can be answered before commencement

of the poll voting. An external scrutineer will be appointed to monitor and count the votes cast

by poll. Poll results will be posted on our website and the Stock Exchange’s website after each

general meeting.

Apart from participating in the Company’s general meetings, Shareholders may send their

specific enquiries requiring the Board’s attention to our Company Secretary. Other general

enquiries can be directed through the Company’s designated contacts, email addresses and

enquiries lines as set out in “Information for investors” on page 110.

Visit our website to read the Shareholders’ Communication Policy.



Changes in Constitutional DocumentsThere is no significant change in the Company’s constitutional documents during the year ended

31 December 2015.

Investor RelationsTo uphold high standards of corporate governance, we maintain effective communications with

the investment community by disseminating information in a timely and accurate manner. Our

Investor Relations (IR) team maintains regular dialogue with institutional investors and research

analysts through one-on-one meetings and conference calls, participating in investment

conferences and attending non-deal road shows both in Hong Kong and overseas. To address a

wider investment community, our corporate website contains comprehensive information about

the Company. Under the Investors page, viewers can find our financial reports and presentation

materials, recent announcements and circulars, as well as IR’s contact details. In addition, the

annual general meeting is another platform that allows effective communication between senior

management, Board members and Shareholders.

Li & Fung is aware of its obligations under the SFO and the Listing Rules, including the overriding

principle that information which is expected to be Inside Information should be announced

promptly and to prevent selective or inadvertent disclosure of Inside Information. The Group

therefore conducts the handling and dissemination of such Inside Information in accordance

with the “Guidelines on Disclosure of Inside Information” issued by the SFO in June 2012 and

Company’s Policy on Inside Information. Members of senior management are identified and

authorized to act as spokespersons and respond to related external enquiries. The Shareholders’

Communication Policy is regularly reviewed by the Board to ensure its effectiveness.

We are committed to complying with disclosure rules and regulations stipulated by the relevant

regulatory bodies, and to communicating the Group’s business strategies, development and

goals to investors and analysts. Being a market leader, we constantly share our market insights

and industry developments with the investment community. From time to time, our senior

management meet with investors and analysts to share their latest views on the business and

to further explain our business model.


Our approach to risk managementWe maintain a sound and effective system of risk management and internal controls to support us in achieving high standards of corporate governance.


Our approach to risk management

We identify and manage both risks and opportunities, and our internal controls review the effectiveness and efficiency of our operations, the reliability of financial reporting and compliance with applicable laws and regulations – all to build a sustainable business.

Risk Management and Internal ControlLi & Fung acknowledges that risks are inherent in our business and the markets in which

we operate. The challenge is to identify and then manage them so they can be understood,

minimized, transferred or avoided. This demands a proactive approach to risk management

and an effective group-wide risk management framework.

The Board is responsible for maintaining a sound and effective system of risk management and

internal controls at Li & Fung and for reviewing its effectiveness, which forms the development

of necessary policies and procedures. We recognize that risk management is the responsibility

of all of our people as an integral part of our day-to-day business process. Our system is

designed to manage the risk of failure to achieve corporate objectives and aims to provide

reasonable, but not absolute, assurance against material misstatement, loss or fraud.

The Board has delegated to management the design, implementation and ongoing assessment

of our system of internal controls, while the Board through its Audit Committee oversees and

reviews the adequacy and effectiveness of relevant financial, operational and compliance

controls and risk management procedures that have been in place. The Audit Committee, in

conjunction with the Risk Management and Sustainability Committee, reviews the emerging risks

of the Group annually, and the risk management and internal controls in place to address those

risks. Qualified professionals within the business maintain and monitor these systems of control

on an ongoing basis.

Described below are the main characteristics of our risk management and internal control

framework.

Performanceand

compliance


andsustainable

growth


value> >>


Effectiveand

operations

Compliancewith

applicable lawsand

regulations

ef�cient

Our Internal Control Framework is Designed to Achieve


Our approach to risk management (continued)

Control Environment

The scope of internal control relates to three major areas: effectiveness and efficiency of

operations; reliability of financial reporting; and compliance with applicable laws and regulations.

The Group operates within an established control environment, which is consistent with the

principles outlined in Internal Control and Risk Management – A Basic Framework issued by

the Hong Kong Institute of Certified Public Accountants.

Our Governance Structure

Our governance structure enables risk identification and escalation whilst providing assurance to

the Board. We assign clear roles and responsibilities for managing risk and implement systems

to facilitate the implementation of policies and guidelines. This structure comprises three layers

of roles and responsibilities to manage risk and internal control as follows:

Role Accountability Responsibilities

Oversight Audit Committee of the

Board, Risk Management


of the Board

Oversight of corporate governance,

financial reporting, risk management

and internal control systems

Risk and

control owner

Li & Fung Management and

Operations Support Group

• Day-to-day execution and monitoring

of internal control

• Strategic policies and operating

guidelines formulation and execution

• Balance between business operation

efficiency and exercising internal

controls

Risk

monitoring and

communication

Corporate Compliance team • Evaluation of risk management and

internal controls to identify areas for

improvement

• Monitoring of corporate governance

disclosure, statutory and listing rules

compliance

• Undertaking of investigations



Management of Key Risks

Li & Fung’s risk management process is embedded in our strategy formulation, business

planning, capital allocation, investment decisions, internal controls and day-to-day operations.

This includes risk identification, exposure evaluation, control development and execution.

There is also a continual process with periodic monitoring, review and reporting to the

Risk Management and Sustainability Committee.

The following are considered material risks faced by the Group and are managed as such:

1. OPERATIONS RISK MANAGEMENT

We have adopted a tailored governance structure with defined lines of responsibility and

appropriate delegation of authority. This is characterized by the establishment of an Operations

Support Group (OSG) to centralize the business support functions and exercise control over

global treasury activities, financial and management reporting, human resources, corporate

services, legal and information technology systems. This aims to ensure adequate segregation

of duties between OSG and front management so that all material transactions, activities,

processes, wrongdoings or irregularities can be identified.

All controls of major operations are supplemented with written policies and Key Operating

Guidelines (KOGs) tailored to the needs of the respective operating groups in the markets in

which we operate. These policies and KOGs cover key risk management and control standards

for our operations worldwide, including the businesses of our different operating groups,

commitments, credit control and advance payments, capital expenditure, authorizations and

approvals for payment processes, and product liability insurance. They also cover administrative

activities including information technology use, business travel, HR processes, training

sponsorship and procedures for handling grievances.

Contingency and business continuity plans, crisis management including fire drills,

preparedness for pandemics and natural disasters and failover tests of key operating systems

are also examined periodically to evaluate effectiveness. Corrective actions are taken

whenever necessary.



2. FINANCIAL AND CAPITAL RISK MANAGEMENT

The Board approves the Company’s Three-Year Plan financial budgets and reviews its operating

and financial performance and key performance indicators against the budget on a semiannual

basis. Monthly updates are also provided to the Board to give timely and comprehensive

assessments of the Company’s performance, position and prospects. Management closely

monitors actual financial performance at both the Group and operating group levels on a

quarterly and monthly basis.

The Group has adopted a principle of minimizing financial and capital risks. Details of our

financial and capital risk management covering market risk (including foreign exchange risk,

price risk, cash flow and fair value interest rate risk), credit risk and liquidity risk are set out in

Notes 36 and 37 to the financial statements on pages 199 to 202.

3. INVESTMENT RISK MANAGEMENT

The Investment Committee (comprising the Honorary Chairman, Group Chairman, Executive

Directors and senior management) reviews strategic investments and acquisitions under

a rigorous investment process. Significant investments and acquisitions (with consideration

above a threshold pre-set by the Board) also require Board approval. Procedures are in place

to monitor the ongoing post-acquisition performance of the investments.

Management also monitors the integration process of newly-acquired businesses through

a structured post-acquisition integration program focusing on the alignment of operational and

financial controls with the Group’s standards and practices. Any significant integration issues

must be reported to the Risk Management and Sustainability Committee.

4. REPUTATION RISK MANAGEMENT

The reputation capital of Li & Fung is built on its long-established standards of ethics in

conducting business. Our core ethical practices, as endorsed by the Board, are set out in

our Code of Conduct and Business Ethics (the Code), available at our internal and external

websites, for all Directors and employees. A number of accompanying policies, guidelines and

procedures covering anti-bribery, gifts, entertainment and hospitality, declaration of interest

and whistleblowing were created to set a framework for our people to make decisions and

comply with both the ethical and behavioral standards of Li & Fung. For ease of reference and

as a constant reminder, the Code and the accompanying policies and guidelines are available

on One Family, our internal communications platform.



All employees are required to abide by the Code and they must apply business principles and

ethics which are consistent with those expected by the Board and the Company’s Shareholders

and other stakeholders. Training sessions are regularly held throughout our global operations

to reiterate the Company’s zero tolerance approach to bribery and the importance of proper

business ethics. Any ethical cases or concerns raised through our guidelines on whistleblowing

and reporting of concerns are investigated independently.

The internal audit program integrates the assessment of compliance with the Code and

the accompanying policies, guidelines and procedures. The Internal Audit team assesses

the significance and risk profiles (e.g. country specific, labor intensity, compliance culture,

complexity of regulations, transaction complexity) of the Group’s business, operations and

processes when determining the audit scope. The scope of internal audits covers the following

in respect of the Code:

• Reviewing compliance with the Code and relevant polices and guidelines during the

onsite audit of global offices and operations, including business transactions and

related documentation

• Reviewing the Code self-assessment program completed by global offices with relevant

supporting documentation

• Conducting interactive forums, training and/or individual meetings with management and

our people to ensure a culture of good corporate governance, risk identification and compliance

is embedded in operations

We are committed to upholding the 10 principles of the United Nations’ Global Compact

regarding human rights, labor, environment and anti-corruption. As included in our Code

of Conduct and Business Ethics, we uphold the International Labour Organization’s core

conventions for the elimination of forced, compulsory or underage labor, elimination of

discrimination in respect of employment and occupation, and respect for freedom of association

and collective bargaining. We also acknowledge our responsibility to maintain a respectful

workplace that is free of all forms of discrimination or harassment.

In 2015, no incident of non-compliance with the Company’s Code of Conduct and Business

Ethics that has significant impact to our operations was reported.



5. REGULATORY COMPLIANCE RISK MANAGEMENT

The Corporate Compliance team is comprised of the Corporate Governance and Corporate

Secretarial teams. Under the supervision of the Group Chief Compliance and Risk Management

Officer and in conjunction with designated internal and external legal advisors, the teams

regularly review adherence to relevant laws and regulations, Listing Rules compliance,

public disclosure requirements and our standards of compliance practices.

6. INFORMATION TECHNOLOGY RISK MANAGEMENT

Investing in information technology systems is an ongoing priority that supports the growing

volume of our business transactions, enables us to improve control and availability of our

information, and enhances the security of our systems to manage cyber security risks.

We remained focused on also improving the governance of our IT systems by moving to a

managed services model for infrastructure security by leveraging leading vendors’ expertise

to protect our infrastructure, as well as updating access controls and authentication methods

to meet industry standards. In 2015, we established our first Network Operating Center (NOC)

in Panyu to monitor our critical data centers on a 24/7 basis. Over 2016 we will bring all data

centers under NOC control. We successfully tested our disaster recovery response for all

critical systems and applications again in 2015. Security awareness training, which is an

important part of our cyber security strategy, is being progressively rolled out to our

colleagues around the world.

We continue to develop our core operating systems, including our Export Trading System (XTS),

portals for our customers and vendors, Mobile Quality Control (MQC) and OTS, our internal

tracking system. We also continue to rollout our financial system E1 to new business units and

completed an upgrade of our specialized freight system in China.

In 2015, a program management office was established to bring further consistency, enhanced

project delivery and greater visibility of all projects across the Company via an online project

portal, Project Central.

Major investments and upgrades continue to be implemented to enhance our financial

consolidation tools and forecasting, and our cyber security monitoring with a focus on data

privacy policies and governance.



Risk Management MonitoringIn conjunction with the Audit Committee, the Risk Management and Sustainability Committee

regularly monitors and updates the Group’s risk profile and exposure and reviews the

effectiveness of the system of internal control in mitigating risks. Key risk areas covered by the

Committees include reputation, business credit, financial and operational risks of our supply

chain operations, investment and acquisitions, taxation, inventory and receivable management,

group-wide insurance, human resources, contingency and disaster recovery, IT governance,

corporate responsibility and sustainability, and specific risks such as operational and adaptation

risks arising from climate change.

Internal and External AuditInternal Audit

The internal audit function is carried out by the Corporate Governance team. Under the

supervision of the Group Chief Compliance and Risk Management Officer, it independently

reviews compliance with Group policies and guidelines, legal and regulatory requirements,

risk management and internal controls and evaluates their adequacy and effectiveness.

The Group Chief Compliance and Risk Management Officer reports all major findings and

recommendations to the Audit Committee on a regular basis.

The Corporate Governance team’s Internal Audit plan is linked to the Group’s Three-Year Plan

and is reviewed and endorsed by the Audit Committee.

The principal tasks of the Corporate Governance team include:

• Preparation of an Internal Audit plan using a risk-based assessment methodology that

covers the Group’s significant operations over a three-year cycle

• Review of all operations, controls and compliance with KOGs and corporate policies,

rules and regulations. The audit scope covers significant controls including financial,

operational and compliance controls, and risk management policies and procedures

• Review of special areas of concerns or risks as raised by the Audit Committee,

the Risk Management and Sustainability Committee or senior management

Major audit findings and recommendations from the Corporate Governance team, and

management’s response to these findings and recommendations, are presented at

Audit Committee meetings. The implementation of all recommendations is followed up on

a three-month basis and the status is reported to the Audit Committee at its meetings.



As part of the annual review of the effectiveness of the Group’s risk management and internal

control systems for 2015, management conducted an Internal Control Self-Assessment of

business operations and relevant accounting functions. The Corporate Governance team has

independently performed a post-assessment review of the findings noted in the self-assessment

programs and considered that sound internal control practices were in place for 2015.

External Audit

Our external auditor, PricewaterhouseCoopers (PwC), performs independent statutory audits

of the Group’s financial statements. To facilitate the audit, the external auditor attended all

meetings of both the Audit Committee and the Risk Management and Sustainability Committee.

The external auditor also reports to the Audit Committee any significant weaknesses in our

internal control procedures which come to its notice during the course of the audit. PwC noted

no significant internal control weaknesses in its audit for 2015.

Overall AssessmentBased on the respective assessments made by management and the Corporate Governance

team and also taking into account the results of the work conducted by the external auditor for

the purpose of its audit, the Audit Committee considered that for 2015:

• The risk management and internal controls and accounting systems of the Group were in

place and functioning effectively, and were designed to provide reasonable but not absolute

assurance that material assets were protected, business risks attributable to the Group

were identified and monitored, material transactions were executed in accordance with

management’s authorization and the financial statements were reliable for publication

• There was an ongoing process in place for identifying, evaluating and managing the significant

risks faced by the Group

• The resources, qualifications, experience, training programs and budget of the employees of

the Group’s accounting and financial reporting teams were adequate

Our board and management team


Board Member Biographies

Victor Fung Kwok KingHonorary ChairmanChairman of Risk Management and Sustainability Committee

Aged 70. Brother of William Fung Kwok Lun and father of Spencer Theodore Fung. Group

Chairman of the Fung Group, a Hong Kong-based multinational which comprises major operating

groups engaging in trading, logistics, distribution and retailing. They include publicly-listed

Trinity Limited, Convenience Retail Asia Limited, Global Brands Group Holding Limited and the

Company. Honorary Chairman of the Company after stepping down as Group Chairman since

May 2012. Joined the Group in 1973 as Manager and became Managing Director of the Group’s

export trading business in 1977. Became Group Managing Director in 1981 and Group Chairman

in 1989. A Director of King Lun Holdings Limited and Fung Holdings (1937) Limited, which are

substantial shareholders of the Company. Holds Bachelor’s and Master’s degrees in Electrical

Engineering from the Massachusetts Institute of Technology, and a Doctorate in Business

Economics from Harvard University. An independent non-executive director of Chow Tai Fook

Jewellery Group Limited (Hong Kong) and Koç Holding A.S. (Turkey). Since July 2015, chairman of

the Advisory Board of the Asia Global Institute at The University of Hong Kong, a new

multi-disciplinary think-tank to assume and carry forward the mission and operations of

Fung Global Institute, of which he was a Founding Chairman (July 2010–June 2015). A member

of the Chinese People’s Political Consultative Conference. A member of the Economic

Development Commission of the Hong Kong Government. Chairman of the Steering Committee

on the Hong Kong Scholarship for Excellence Scheme. Chairman of the Hong Kong Trade

Development Council (1991–2000), the Hong Kong representative on the APEC Business Advisory

Council (1996–2003), chairman of the Hong Kong Airport Authority (1999–2008), chairman of

the Council of The University of Hong Kong (2001–2009), chairman of the Greater Pearl River

Delta Business Council (2004–2013), a member of the Commission on Strategic Development of

the Hong Kong Government (2005–2012), chairman of the International Chamber of Commerce

(2008–2010), a member of WTO Panel on Defining the Future of Trade (2012–2013) and a vice

chairman of China Centre for International Economic Exchanges (2009–2014). Independent

non-executive director of BOC Hong Kong (Holdings) Limited (June 2002–June 2014). Retired

from the board of China Petrochemical Corporation (People’s Republic of China). In 2003 and

2010, the Hong Kong Government awarded Victor the Gold Bauhinia Star and the Grand Bauhinia

Medal respectively for his distinguished service to the community.


Our board and management team (continued)

William Fung Kwok LunGroup Chairman

Aged 67. Brother of Victor Fung Kwok King and uncle of Spencer Theodore Fung. Group

Chairman since May 2012. Executive Deputy Chairman from 2011 to May 2012 and before

that, Group Managing Director from 1986 to 2011. Joined the Group in 1972 and became a

Director of the Group’s export trading business in 1976. Graduated from Princeton University

with a Bachelor of Science degree in Engineering. Holds an MBA degree from the Harvard

Graduate School of Business. Degrees of Doctor of Business Administration, honoris causa,

were conferred by The Hong Kong University of Science & Technology and by The Hong Kong

Polytechnic University. An independent non-executive director of VTech Holdings Limited,

Shui On Land Limited, Sun Hung Kai Properties Limited, The Hongkong and Shanghai Hotels,

Limited and Singapore Airlines Limited. Chairman and Non-executive Director of Global Brands

Group Holding Limited and a Non-executive Director of Convenience Retail Asia Limited

and Trinity Limited, all within the Fung Group. A Director of King Lun Holdings Limited and

its wholly owned subsidiary, Fung Holdings (1937) Limited, substantial shareholders of the

Company. Past chairman of the Hong Kong General Chamber of Commerce (1994–1996),

The Hong Kong Exporters’ Association (1989–1991) and the Hong Kong Committee for Pacific

Economic Cooperation (1993–2002). Awarded the Silver Bauhinia Star by the Hong Kong Special

Administrative Region Government in 2008.

Spencer Theodore FungGroup Chief Executive Officer

Age 42. Group Chief Executive Officer since July 2014 and Executive Director since 2008.

Previously Group Chief Operating Officer (2012–July 2014), in charge of the global infrastructure

of the Company. Before this, President of LF Europe, managing the Group’s European

distribution business. Joined the Group in 2001. An independent non-executive director of Swire

Properties Limited. A director of Young Presidents’ Organization – Hong Kong Chapter, Limited.

A member of the General Committee of The Hong Kong Exporters’ Association and the Board

of Trustees at Northeastern University. Holds a Bachelor of Arts degree from Harvard College

and Master of Science in Accounting and Master in Business Administration degrees from

Northeastern University. A US Certified Public Accountant. The son of Victor Fung Kwok King,

Honorary Chairman, and nephew of William Fung Kwok Lun, Group Chairman.



Marc Robert CompagnonExecutive Director and President of LF Sourcing

Aged 57, Executive Director since 2014. President of LF Sourcing overseeing the Group’s

global agency business for apparel and hardgoods. Joined the Group in 2000 at the time of the

acquisition of Colby International Limited where he was Chief Merchandising Officer for 17 years

and was responsible for establishing Colby’s global sourcing network and sales and marketing

strategies. Holds a Bachelor of Arts degree from The University of Vermont. Member of the

Board of Advisors of the School of Business Administration at The University of Vermont and

a founding member of Cotton’s Revolutions. Non-executive chairman of TheAbacaGroup, Inc.

(Cebu), a hotel and restaurant management group.

Board Member Biographies (continued)

Paul Edward Selway-SwiftIndependent Non-executive DirectorChairman of Nomination Committee

Age 71. An Independent Non-executive Director since 1992. Chairman of Pure Circle Ltd,

a producer of natural food ingredients, which is quoted on the London Stock Exchange.

An Independent Non-executive Director of Global Brands Group Holding Limited whose

shares are listed on The Stock Exchange of Hong Kong Limited. Formerly, deputy chairman of

HSBC Investment Bank PLC (1996–1998), a director of The Hongkong and Shanghai Banking

Corporation Limited in Hong Kong (1992–1998) and chairman of Atlantis Investment

Management (Ireland) Ltd. (2007–2014).

Allan Wong Chi YunIndependent Non-executive DirectorChairman of Remuneration Committee

Age 65. An Independent Non-executive Director since 1999. Chairman and group chief

executive officer of VTech Holdings Limited. Co-founded VTech Group in 1976. Holds a Bachelor

of Science degree in Electrical Engineering from The University of Hong Kong, a Master of

Science degree in Electrical and Computer Engineering from the University of Wisconsin and

an Honorary Doctorate of Technology from The Hong Kong Polytechnic University. Deputy

chairman and independent non-executive director of The Bank of East Asia, Limited. An

independent non-executive director of China-Hongkong Photo Products Holdings Limited and

MTR Corporation Limited. Awarded the Silver Bauhinia Star and the Gold Bauhinia Star in 2003

and 2008 respectively.



Martin Tang Yue NienIndependent Non-executive Director

Age 66. An Independent Non-executive Director since 2009. Former chairman, Asia of Spencer

Stuart & Associates, a global executive search consulting firm. An independent non-executive

director of the publicly-listed CEI Contract Manufacturing Limited and China NT Pharma Group

Company Limited. Holds a Bachelor of Science degree in Electrical Engineering from Cornell

University and Master of Science in Management from the Massachusetts Institute

of Technology.

Margaret Leung Ko May YeeIndependent Non-executive DirectorChairman of Audit Committee

Aged 63. An Independent Non-executive Director since 2013. Deputy chairman, managing

director and an executive director of Chong Hing Bank Limited. Former vice-chairman and chief

executive of Hang Seng Bank Limited, chairman of Hang Seng Bank (China) Limited, a director

of various subsidiaries of Hang Seng Bank Limited, a director of The Hongkong and Shanghai

Banking Corporation Limited and the group general manager of HSBC Holdings plc.

An independent non-executive director of First Pacific Company Limited, Sun Hung Kai

Properties Limited, Hong Kong Exchanges and Clearing Limited, QBE Insurance Group Limited

and China Construction Bank Corporation. Holds a Bachelor’s degree in Economics, Accounting

and Business Administration from The University of Hong Kong.



Supporting the Board

Edward Lam Sung LaiChief Financial Officer

Aged 49. Chief Financial Officer of the Group since 2012, overseeing the Group’s global finance

functions, including corporate finance, treasury, investor relations, financial planning and

analysis, risk management and financial reporting. Over 20 years of experience in banking,

finance and accounting. Prior to joining Li & Fung, held various senior corporate and investment

banking positions at Citi and Morgan Stanley, and practiced public accounting at Coopers &

Lybrand. Holds an MBA degree from The University of Chicago, high honors, and a Bachelor

of Business Administration degree from The University of Texas at Austin, highest honors.

A US Certified Public Accountant, and a member of Takeovers and Mergers Panel of Securities

and Futures Commission of Hong Kong.

Jason Yeung Chi WaiGroup Chief Compliance and Risk Management Officer

Aged 61. Group Chief Compliance and Risk Management Officer of the Company since

July 2015. Also, the Group Chief Compliance and Risk Management Officer of Fung Holdings

(1937) Limited, a substantial shareholder of the Company and its publicly-listed companies in

Hong Kong. Extensive experience in handling legal, compliance and regulatory matters, and

worked previously in both the public and private sectors practising corporate, commercial and

securities law. Prior to joining the Fung Group, deputy chief executive (Personal Banking) of

Bank of China (Hong Kong) Limited (BOCHK) with responsibility for the overall performance of

the personal banking businesses of BOCHK. Graduated from The University of Hong Kong with a

Bachelor’s degree in Social Sciences. Also graduated from The College of Law, United Kingdom

and holds a Bachelor’s degree in Law and a Master’s degree in Business Administration from

The University of Western Ontario, Canada.

Terry Wan Mei ChowCompany Secretary

Aged 52. Group Company Secretary of the Company since 1996 and responsible for the

company secretarial services of the Group. Graduated from the Hong Kong Polytechnic (now

known as The Hong Kong Polytechnic University) and started her career as company secretary

at Ernst & Young in 1985. A fellow member of both The Institute of Chartered Secretaries and

Administrators in England and The Hong Kong Institute of Chartered Secretaries (HKICS).

A member of the Membership Committee of HKICS since 2013. Past member of the Company

Secretaries Panel of HKICS (2013–2015). Recipient of the 1st Asian Company Secretary

Recognition Award by Corporate Governance Asia in 2013.



Senior Management Biographies

Annabella Leung Wai PingPresident of LF Fashion

Aged 63. President of LF Fashion managing the Group’s apparel and fashion accessories

principal business globally. Formerly, the Regional Director of North Asia Apparel for

Inchcape, a global sourcing network acquired by the Company in 1995. An Executive Director

of the Company from 2000 to May 2010. Holds a Master of Science degree in Biology from

Northeastern University. Chairman of the Vetting Committee for the Professional Services

Development Assistance Scheme of Commerce and Economic Development Bureau and a

member of the Personalized Vehicle Registration Marks Vetting Committee. Formerly served

on various advisory boards for The Hong Kong Exporters’ Association, Hong Kong Trade

Development Council, Clothing Industry Training Authority and Hong Kong Export Credit

Insurance Corporation.

Emily Mak Mok Oi WaiChief Administrative Officer

Aged 54. Chief Administrative Officer since 2014 and responsible for global hub operations,

human resources, corporate services and various strategic projects of the Group. Focuses on

strengthening the global infrastructure set up and talent to support business success. Joined

the Group in 2000 with the acquisition of Colby International Limited where Emily was the

Chief Operating Officer and directly responsible for the operational and merchandising matters

for Colby’s apparel business worldwide. After that, managing the Group’s department store,

mass market, supermarket and specialty store apparel business in the Americas, Southern

Hemisphere and Japan. In 2010, Emily served as the Chief Operating Officer of DSG, a dedicated

sourcing group servicing Wal-Mart globally. Prior to her current role, President of LF USA

Sourcing, spearheading the sourcing and operations in Asia. Graduated from The University of

Hong Kong with a Bachelor of Social Sciences degree.

Gerard Jan RaymondPresident of LF Asia and LF Beauty

Aged 59. President of LF Asia managing the Group’s food, health, beauty and cosmetics

wholesale and distribution business in Asia. Also, President of LF Beauty overseeing the

Asia-based operations of the Group’s beauty and cosmetic business. Previously, an Executive

Vice President, Distribution and Regional Managing Director of Integrated Distribution Services

Group Limited. Joined the Group in 2003. Educated in Australia with a Bachelor’s degree

in Business. A Fellow of the Australian Marketing Institute.


Our Senior Management TeamFrom left to right: Henry Chan, Mannel Fernandez, Marc Compagnon, Wai Ping Leung, Lâle Kesebi, Spencer Fung, Joseph Phi, William Fung, Emily Mak, Victor Fung, Richard Darling, Stephen Lister, Gerard Raymond and Edward Lam





Senior Management Biographies (continued)

Henry ChanPresident of LF Products

Aged 65. President of LF Products managing the Group’s hardlines principal business globally.

Joined the Group in 1972. An Executive Director of the Company from 1992 to May 2009.

Graduated from The University of Hong Kong with a Bachelor of Social Science degree. Holds an

MBA degree from The Chinese University of Hong Kong. A member of The Hong Kong Institute

of Directors and also a member of the advisory Board of the MBA Programmes of the Faculty of

Business Administration, The Chinese University of Hong Kong.

Joseph Chua PhiPresident of LF Logistics

Aged 53. President of LF Logistics managing the Group’s logistics, freight, data analytics and

supply chain management businesses. An Executive Director of Integrated Distribution Services

Group Limited from 2004 to April 2011. Joined the Group in 1999. Graduated magna cum laude

from the University of The Philippines (UP) with a Bachelor of Science degree in Industrial

Engineering and attained an MBA degree with top honors from the same university. Member

of Phi Kappa Phi and Pi Gamma Mu international honor societies. 2011 recipient of UP College

of Business Administration Distinguished Alumnus Award. 2013 recipient of UP Industrial

Engineering Alumni Award and UP Alumni Engineers Global Achievement Award for Logistics.

Chairman of GS1 Hong Kong. Director of GS1 Management Board. Member of the Advisory

Committee, Centre for Marketing and Supply Chain Management at The Hong Kong University of

Science and Technology (HKUST). Adjunct Professor of Information Systems, Business Statistics

and Operations Management at HKUST. Member of Supply Chain 50, an association of the top

supply chain professionals in the world. Board member of Macy’s China Limited.

Lâle KesebiChief Communications Officer & Head of Strategic Engagement

Aged 47. Chief Communications Officer & Head of Strategic Engagement since 2014 and

responsible for global corporate communications with all internal and external stakeholders

of the Company and leading the development of strategy on key initiatives aligning the

organization to the Company’s goals. Joined the Group in 2003. Holds a Bachelor of Science

(Honours) degree and a Bachelor of Law degree from Dalhousie University. Past member of

The Law Society of British Columbia (Canada). Currently, member of Board of Governors of The

Women’s Foundation in Hong Kong. Member of Board of Trustees of the Asian University for

Women (AUW) and co-chair of the AUW Support Foundation in Hong Kong. Formerly, chair of

the Canadian Chamber’s Business Policy & Government Relations committee and the Debenture

and Scholarship committee of the Canadian International School in Hong Kong.



Manuel Carlos FernandezGroup Chief Technology Officer

Aged 45. Group Chief Technology Officer since March 2006, responsible for strategic technology

direction and leadership to all IT heads within the Fung Group including Convenience Retail

Asia Limited, Trinity Limited, Global Brands Group Holding Limited and the Company. Assumed

additional role of Head of Global Transactional Services of the Company in 2014. Joined the

Group in 1999 as Regional IT Manager – Strategic Applications of Li & Fung Distribution Group.

Chief Information Officer of Integrated Distribution Services Group between 2001 to 2006.

Holds a Bachelor of Science in Computing for Real Time Systems (Honours) degree from

University of the West of England Bristol. Awarded CIO of the year (Hong Kong region) in

Hitachi Data Systems IT Inspiration Awards 2009.

Richard Nixon DarlingHead of Government and Public Affairs

Aged 62. Head of Government and Public Affairs overseeing the Group’s government relations,

public affairs and supply chain sustainability on global industry and multi-stakeholder initiatives.

Also overseeing the Group’s Vendor Compliance & Sustainability since 2015. Prior to his current

role, President of DSG overseeing the Group’s dedicated sourcing group servicing Wal-Mart

globally. The founder of The Millwork Trading Co., Ltd, a joint venture with Li & Fung that became

a wholly-owned subsidiary from 1999 to 2014. Board member of the American Apparel and

Footwear Association and K.I.D.S./Fashion Delivers. Member of the Board of Governors of Parsons,

The New School for Design. Representative of the Group on the Center for Retailing Excellence

Executive Board of the Sam M. Walton College of Business at the University of Arkansas, the

Board of Advisors of the Cornell University ILR School New Conversation Project, the Alliance for

Bangladesh Worker Safety and The Accord on Fire and Building Safety in Bangladesh.

Robert Stephen ListerPresident of LF Private Label

Aged 59. President of LF Private Label managing the Group’s wholesale and distribution business

in US and Europe. Chief Operating Officer of LF Europe since 2009 and became President in

2013. Before that, Group Chief Executive of Peter Black Holdings plc, a public company listed on

the London Stock Exchange which was privatized in 2000 and part of its business was acquired

by the Company in 2007. A Fellow of The Institute of Chartered Accountants in England & Wales.

Our people


Our peopleOur people power our business and we are committed to their wellbeing and development.

Our people


Our Culture Crew, Yi Hoo Ong, Francesca Ayala and Cherie Wong,

on their global tour to share our values and connect with colleagues

Our people


Our people are our greatest asset. We attract and retain entrepreneurial talent worldwide, with in-depth supply chain and logistics expertise, and provide our people with development opportunities at all levels.

Our trading and logistics businesses are led by industry experts, who have deep product

category and channel expertise across sourcing and logistics. From designers, merchandisers,

quality assurance and control experts to our warehouse delivery and logistics professionals,

our people are highly skilled and drive our growth and success.

Our senior management and teams around the world bring a vibrant mix of nationality, ethnicity,

culture as well as professional and life experience that enriches our company. This breadth of

cross-cultural and international work experience supports the sustainability of our global trading

and logistics businesses.

We see diversity as a source of strength and pride. Our people are inherently diverse – we have

25,320 employees representing over 50 nationalities operating in more than 40 economies.

Our diverse culture and broad global network are key to our success and enable us to work

and collaborate across borders. Our diversity inspires innovation, enriching every aspect of

our business.

Our business is built on long-term relationships within our teams and with our customers,

suppliers and communities. Together, we strive to build sustainable businesses and supply

chains. Attracting and developing the best skill and talent is essential to the sustainability of

our business. In all of our operations we attract a mix of local and international professionals.

Our strengthened digital presence also helps us to engage the best talent from all over the

world. We started to leverage LinkedIn as part of our recruitment strategy in 2015. For our effort,

we were awarded the Gold Award for being the 2015 LinkedIn Hong Kong Evolving Employer.

As of 31 December 2015, we hit the 40,001 follower mark and received 21,000 job applications

during the year.

1 For our full-time employees on permanent contracts, 52% are female and 48% are male.

58% of our female employees and 42% of male employees work full-time on temporary or other contracts.

Employees by Business Network

and Gender

Management Team by Gender

Employees by Region

Employees by Gender1

Other Regions

The Americas

9%3%

88%

Asia Pacific

58%

42%43%

57%

Trading, 75%

Logistics, 25%

Female

Male

25,320EMPLOYEES WORLDWIDE

55%MALE

45%FEMALE

46%MALE

54%FEMALE


Our people (continued)

In addition to attracting external talent, we encourage internal transfer opportunities for our

people who want to enhance their skills or develop new competencies. In 2015, 15% of our open

positions were filled by existing employees.

Our ValuesOur values form the basis of our culture, business strategies and brand. Three core values unite

us and guide our actions:

We are entrepreneurs

We are humble

We are family

Our core values are more than just words. They are meaningful expressions of who we are.

They define our behavior with each other as colleagues, with our customers and suppliers, and

with all those we interact with in our daily lives.

In 2015 a special team, known as the ‘Culture Crew’, continued our global campaign on

values, visiting 100 locations in 60 cities across 30 countries, reaching over 90% of our people

around the world. A key aspect of the initiative was to host discussion forums to learn about

what is important to our colleagues and to share their stories globally. A series of personal

stories named ‘The Living Book of Values’ was created and posted on our One Family internal

communication platform for all of our people to access anywhere, anytime. The team also

documented their experiences and impressions of each of the offices they visited with

over 100 blog posts, videos and photo albums. The Culture Crew played a key role in raising

awareness and stimulating discussion on our values and fostered closer ties and greater

collaboration among all of our people.

Visit our website to understand more about our values.



Our ApproachFostering diversity, living our values, caring for and engaging our people, developing talent, and

providing a respectful, safe and healthy working environment are essential elements of our

Sustainability Strategy. Our people initiatives focus on three areas:

1) C.A.R.E. – caring for and engaging our people

2) Wellbeing – enhancing the wellbeing of our people

3) Career – attracting and developing talent

Caring for and Engaging our People

Connecting, appreciating, responding to and encouraging our people – what we know as

‘C.A.R.E.’ – is a core engagement initiative at Li & Fung. Across our global operations, C.A.R.E.

drives our efforts in providing an environment that is entrepreneurial, engaging and fosters

a long-term commitment to the company.

Each year we hold multiple events to share our goals and encourage dialogue and innovative

thinking across geographies. Through town halls, annual conferences, team meetings and other

events, our people connect to learn from seasoned professionals and collaborate with peers

to incubate business ideas.

In 2015, our Group CEO Spencer Fung launched a series of monthly, small group gatherings

with colleagues working in various roles from different businesses. The gatherings enable our

colleagues to understand more about the company’s direction and allow our CEO to learn about

the challenges they face and to share his thoughts directly with them. These informal gatherings

will continue in 2016.

Our One Family internal communication platform is key to connecting our people around the

world. To further boost connection and encourage our people to share content, we revamped

One Family in 2015 adding new features such as blogs, a social feed and communities

of interest. Our people can now freely share their thoughts and ideas instantly, upload

photos of activities hosted in local markets and form communities with colleagues who have

the same interests and passions, or work in the same role. In 2015, One Family attracted

16,736 unique users.

COLLEAGUES with 5+ years long service awards in 2015

3,470years5+

COLLEAGUES with 10+ years long service awards in 2015

1,600years

10+



We also arrange appreciation events, special days for families and awards that recognize the

achievements of our people. In 2015, 3,470 employees reached anniversaries with Li & Fung

for five years or more and were awarded Long Service Awards. Of our people receiving awards

in 2015, 46% had worked with us for 10 years or more, including 47 colleagues with 30 years’

service or more – a remarkable achievement.

Enhancing Wellbeing

The health, safety and wellbeing of our people are important to us. Our strategy and programs

are tailored to support our peoples’ wellbeing and to meet the specific occupational health

and safety requirements of different working environments within our offices, manufacturing

facilities and distribution centers. To support local needs and to meet local legal requirements,

we ensure that our working hours and benefits, and other terms of employment, are tailored to

each locality in our global network. In 2015 there were no fatalities in our workplaces globally.

To identify opportunities to enhance our working environment, we conducted a global self-

assessment survey on our human resources practices in 2015. As a result, we are enhancing

parental leave provided globally, and in some locations strengthening tracking of human

resources metrics.

We are committed to maintaining a respectful workplace free from discrimination and

harassment of any form and to providing equal opportunities for all our people in support of

international declarations on human and labor rights2. We affirm these commitments in our

Code of Conduct and Business Ethics. All new employees learn about the Code during their

orientation. Policies and guidelines for addressing the Code are implemented in the acquisition

of new businesses and through our ongoing recruitment, training, performance assessment,

disciplinary and grievance processes.

2 International Labour Organization’s Declaration on Fundamental Principles and Rights at Work,

the UN Global Compact’s 10 Principles and the UN Declaration of Human Rights



Compliance with our Code is reviewed quarterly by the Risk Management and Sustainability

Committee of the Board and audited by our corporate compliance team, under the supervision

of the Group Chief Compliance and Risk Management Officer, who reports any material

non-compliance to the Board directly or through the Risk Management and Sustainability

Committee. In 2015, no instances of non-compliance were reported.

Our manufacturing and logistics facilities have all implemented formalized occupational health

and safety management systems. Our Bangkok, Jakarta and Kuala Lumpur manufacturing

facilities are certified to the OHSAS 18001 Occupational Health and Safety Management System

standard, as are three of our logistics facilities in China and one in each of the Philippines,

Singapore and Thailand. Our Trowbridge manufacturing facility meets RIDDOR3 standards and

the Tonawanda facility exceeds the standards of the OSH Act4. All facilities hold safety talks and

training on workplace hazards, safe working practices, chemical management, forklift operation,

defensive driving, and spill, fire and emergency prevention, drills and response. Annual

Environmental, Health and Safety Weeks and topical OHS events are also held, and counselling

services, medical clinics and vaccinations are provided.

We are very pleased that our manufacturing facility in Thailand won the 2015 National

Outstanding Award on Occupational Safety, Health and Environment for the third year in a row.

We have fitness centers in a number of our workplaces and host a variety of exercise and

wellness activities, ranging from health checks, yoga and dancing sessions to marathon training.

We also continue to share tips on health and wellbeing through regular ‘Useful Tips’ emails.

We are committed to ensuring that our people feel safe and respected and able to apply their

best skills at work. We believe this improves performance at work and brings benefits to our

people, both personally and professionally.

Visit our website to read about our successful myRun campaign and other activities to

promote wellbeing.

3 Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013.

4 Occupational Safety and Health (OSH) Act of 1970, 29 CFR 1910 Occupational Safety and Health.



Developing Talent

We believe that building a strong culture of learning plays a vital role in maintaining sustainable

growth. To ensure our people leverage their talents and develop their skills and competencies,

we provide development programs focusing on leadership, broadening professional knowledge

and enhancing productivity. We also provide flexible learning channels from online and

classroom courses, on-the-job experience, networking and mentoring, to cross-border

opportunities. In 2015, 21,284 colleagues attended learning opportunities – an increase of 66%.

The number of in-house learning programs increased 10% to 1,257 programs. While average

learning hours per employee dropped to four hours in 2015, this was partly due to our proactive

response to our people’s feedback to condense the content of our online courses to encourage

greater participation. It was notable that during the year, the overall percentage of our people

assessing learning opportunities increased sharply to 84%.

Each year we attract exceptional talent globally to join The Program for Management

Development (PMD). Launched in 2010, this one-year, intensive program aims to cultivate

entrepreneurialism and develop our future business leaders. It includes corporate orientation

and training, rotational assignments in the Fung Group’s core businesses and business

education programs in Shanghai and New York. 12 Management Associates participated in the

2015 intake. A group of current and former PMDs are shown on the front cover of this Report.

In addition to our more formalized learning and development activities, our people use a robust

learning platform, known as ‘MyCareer’, which lets them learn at their own pace. MyCareer

covers career development, skill training, expertise sharing and personal and management

development. MyCareer has over 130 learning videos and podcasts related to merchandising,

retail and technology skills and in 2015, it was accessed by 21,284 colleagues.

We believe that building a strong culture of learning, experimentation and innovation plays a vital role in our growth.

PERCENTAGE OF EMPLOYEES PARTICIPATING IN LEARNING PROGRAMS

50%2014

84% 2015 increase over 2014


10%



DEVELOPING LEADERS

Developing leaders, at all levels, is a key priority. Focused programs, networking, experiential

and on-the-job learning are just some of the ways we foster leadership. We have developed

a tailored leadership roadmap for different leadership levels. Since 2010, we have partnered

with MIT Sloan Executive Education and The University of Hong Kong’s Faculty of Business and

Economics to implement our Executive Leadership Program. In conjunction with the Stanford

Center for Professional Development, we have implemented our Advanced Leadership Program

since 2012. The goal of both courses is to expose our next generation of business leaders to

the latest business thinking and to foster collaboration across teams. In 2015, there were two

intakes for 100 senior managers. During the program, attendees were tasked with projects

related to the supply chain, retailing and macroeconomic and market trends, and charged with

developing outcomes that can be applied to our business.

The leadership program was extended to mid-level managers for the first time, with eight intakes

being organized for 185 attendees in 2015. To cultivate an environment of ‘Leaders building

Leaders’, 23 of our senior managers became internal trainers for the program. In addition, we

continue to implement the New Manager’s Program to help newly promoted colleagues take on

the role of people managers.

PROFESSIONAL AND TECHNICAL SKILLS

Enhancing skills and broadening the business knowledge of our people is an important focus

of our people strategy. In 2015, we introduced a new costing program for merchandisers to

equip them with critical knowledge to cost each step of the supply chain – from raw material

sourcing and manufacturing to logistics and retail. Additionally, a series of workshops around

omni-channel, retail and sourcing, and seminars on fashion and business trends, were hosted.

We were also very proud to launch an in-depth dying and coloring program based on the

requirements and guidelines of the Society of Dyers and Colourists (SDC). The program deepens

the dying and coloring skills of our colorists and supports them to become Chartered Colourists.

Of the 36 trained colorists, five attained the qualification of Associate of the SDC and will

become Chartered Colourists by 2017. These five colorists became ‘Learning Champions’ and

continue to transfer their knowledge to colleagues through sharing sessions and how-to videos.

Visit our website for more information about our learning programs, including those to

support our customers.

MyCareer Learning Platform

LEARNING VIDEOS ANDPODCASTS AVAILABLE

130COLLEAGUES ACCESSEDONLINE LEARNING

21,284+



INNOVATION PROGRAMS

We believe innovation is a key factor to staying competitive, especially against global market

changes. We introduced a number of programs in 2015 to spur innovation. The Innovation

Catalyst program in Shanghai, gathered middle managers across different businesses for an

eight-week engagement that included training on design thinking and a team-based innovation

challenge. This was complemented by coaching on innovation techniques, such as rapid

prototyping and ways to connect what they had learned back to the business and to transfer

their knowledge to other colleagues. Together with the Fung Academy, we plan to roll this out

to other offices in 2016.

We believe that collaborative learning is key to developing an innovative culture. In 2015, we

formed a Design Community with over 290 members in Hong Kong, Manchester and New York.

The community is a platform for our designers to share their experience and collaborate with

and learn from each other to further boost innovation within the company.

Our supply chain


Production being checked by one of our suppliers in Istanbul, Turkey

Our supply chain


Our supply chainWe partner with our customers and suppliers to create value through the supply chain.

Our supply chain


At Li & Fung we manage complex and unique supply chains in over 40 economies around the

world for our customers. Our global supplier network has been evolving for over 100 years.

While over 80% of our sourcing business is with a core group of strategic suppliers, our network

also allows us the flexibility to move production across markets, balance capacity constraints

and respond to demand, while meeting specific customer needs, such as proximity to the

end-consumer or technical expertise and distribution. By sourcing from multiple factories across

multiple markets, we can also activate business contingency plans when unexpected issues

occur and continue production for our customers.

Our Vendor Support Services (VSS) unit focuses on the needs of our global supplier base as

it addresses the challenges facing the industry. In 2015 we developed services to support

suppliers to enhance productivity, operational and resource efficiencies and product testing,

and to capture performance data along the supply chain. We want to help suppliers mitigate

the increasing costs of labor and other inputs by better managing material and resource usage,

production swings, operations and logistics.

Addressing challenges and opportunities in our supply chain is integral to our Sustainability

Strategy. Our initiatives focus on three areas:

• Managing risk and furthering compliance in our supply chains

• Sourcing responsibly

• Collaborating with customers and partners to build sustainable supply chains

Supply Chain Compliance

Improving workplace conditions and overall factory management practices brings benefits to

workers, suppliers, factories and communities. Each of the locations in our supply chain has a

unique set of challenges that we manage through our network of on-the-ground teams and

in collaboration with industry and non-profit organizations and local authorities.

Managing our supply chain risk starts with strategic sourcing decisions by our customers

and/or sourcing teams and our continuing efforts to direct business to suppliers that share our

commitment to compliance and enhancing sustainability performance. Our Vendor Compliance

& Sustainability (VCS) team assesses supplier risk and compliance and supports factories to

continually improve performance.

We believe in building sustainable supply chains that create value for our customers, factories, workers and communities. We partner with customers and suppliers who share this commitment and collaborate with industry stakeholders to further positive change.

SUPPLIERS WORLDWIDE15,000+

THREE LARGESTSOURCING MARKETS

1. China

2. Vietnam

3. Bangladesh


Our supply chain (continued)

Our Supplier Code of Conduct, which is based on the International Labour Organization (ILO)’s

core conventions, outlines the requirements for suppliers to do business with Li & Fung. This

includes compliance with relevant local laws and regulations and meeting the Code Standards

related to health and safety, labor rights, environmental protection, accountability, transparency

and ethics. We also support our customers to meet the requirements of the California

Transparency in Supply Chains Act and the UK Slavery Act, which came into effect in 2015.

Suppliers are required to sign acceptance of our Code of Conduct and accompanying Standards.

Performance against our Code is assessed through audits conducted by our VCS team,

or external audit firms approved by Li & Fung or our customers. When compliance violations

are identified, the factory is provided with a Corrective Action Plan including a reasonable

timeline for completing the remedial actions, which also must be verified by the audit team.

Any grievances that arise as part of factory incident reporting are investigated by our VCS teams

and the results shared with all concerned with a response plan to address the grievance.

Our compliance monitoring program is maintained throughout the business relationship with an

expectation for suppliers to continually improve compliance performance as per their Corrective

Action Plan and beyond. In addition, our VCS teams have developed and marketed fee-based

training modules that specifically meet factories’ needs for quality, compliance-related training.

As a supply chain manager, an important task is also to ensure product quality and safety.

Li & Fung has experienced quality assurance and control (QA/QC) teams that follow global

procedures to provide oversight of product safety testing and inspections. In 2015, there were

no recalls of products for health and safety reasons.

Recognizing that our QA/QC personnel can be our “eyes and ears” in the supply chain, we

have been progressively training them to be aware of observable potential safety hazards and

underage and forced labor through our Observer Development Program. As part of our ongoing

factory monitoring program, our QA/QC teams proactively identify such risks and incidents

and raise them directly with factory management and our sourcing and compliance teams for

appropriate follow up.

We are committed to building sustainable supply chains at Li & Fung.

Richard Darling, Head of Government and Public Affairs

“



Review of Our Audit and Compliance Process

In 2015, we conducted a thorough review of our audit program against evolving industry

standards, key industry audit frameworks, consumer expectations and our experience

on-the-ground working with suppliers to further compliance and performance. We reviewed our

Supplier Code of Conduct, accompanying Standards and Guidance, introduced a new audit tool,

established a new rating and grading system, expanded our equivalency program and enhanced

our audit scope.

These enhancements are in response to the challenges facing our industry and are part of our

broader shift to focus on remediation and capacity building to ensure that factories continually

improve working conditions. The standardized audit tool, which meets our customers’

requirements and aligns with common industry standards, allows for consistent audit execution

and reporting. Our expanded audit equivalency program saves time and resources spent on

duplicate and overlapping audits and Corrective Action Plans. The enhanced audit ratings and

revised approval periods provide factories with longer timeframes to make improvements

and the ability to track their ongoing performance and progress.

This new approach will drive efficiencies and empower factories to take ownership of their

performance. Factories will see the value of investing in an audit and be more accountable and

motivated to take action to improve factory conditions and compliance. Developing, and working

with, a better supplier base creates a win-win situation for every stakeholder in the supply chain.

The key updates are summarized below.

Supplier Code

of Conduct

The updated Code more explicitly outlines our expectations

for meeting key Standards related to:

• Management systems

• Health and safety practices

• Labor practices

• Environmental practices

• Accountability, transparency and ethics

Rating and Grading A new rating and grading system was established to:

• Reduce audit fatigue with longer approval periods to allow

corrective action to be implemented

• Add a numerical grading to allow for better tracking of supplier

progress over time

• Provide clearer terminology for ratings



Equivalency Program Our equivalency program was expanded to all factories to:

• Reduce audit duplication, overlapping Corrective Action Plans and

turnaround time for factory approvals

• Enable VCS to review and convert audit reports by external

parties to our grading

Audit Scope The enhanced audit scope covers:

• Management systems – governance, risk assessment, grievance process, legal disclosure

• Health and safety – fire, electrical, machine, chemical and

facility safety, emergency handling, first aid response, food health

and safety, ergonomics

• Labor and ethics – voluntary labor, working age, working hours,

wages and benefits, fair and equal treatment, freedom of

association, ethical conduct, transparency

• Environment – air emissions, wastewater, noise pollution,

hazardous waste

• Security (C-TPAT) – personnel security, physical security,

information access controls, shipment information controls,

storage and distribution, business partner requirements,

export logistics, transparency in the supply chain

Social Audit The social audit process was enhanced with a global protocol that

clearly outlines expectations for conducting audit activities. These

include raising cases for special handling such as zero tolerance

issues, potential building structural collapse, when access is denied

and when onsite corrections are required

Security Audit The security audit was enhanced to ensure alignment with the

US Customs and Border Protection Customs-Trade Partnership

Against Terrorism (C-TPAT)’s minimum criteria for Manufacturers

and Best Practices



Supplier Capacity BuildingWe are committed to working with our suppliers to move them up the value chain. Building

capability across our supplier base helps raise compliance standards in the industry. Improving

factory operations and performance is part of our long-term goal of building sustainable global

supply chains.

We focus our assessment, technical support and capacity-building efforts on establishing

better-managed factories and better working conditions. The enhancements made to our

auditing and compliance process in 2015 enable us to deepen our focus on improving factory

operations through capacity-building programs. We believe that to achieve sustained change in

the supply chain, it is essential to support factories to meet our compliance Standards, and to

also ensure they have the information and training to build their capacity to integrate social and

environmental best practices into their day-to-day operations.

We continue to implement training programs for our own employees and factory representatives

on a number of topics, including new international regulations, customer-specific standards

for health and safety, and environmental and social compliance. In 2015, we held 591 sessions

for 6,965 factory representatives and 5,044 of our own people. This is in addition to the

634 training sessions held in 2014 for over 12,000 factory representatives and more than

3,000 of our employees.

A Snapshot of Our Training in 2015

Training TopicNo. of

FactoriesNo. of

People Trained

Conflict Minerals, Human Trafficking and Forced Labor 1,460 2,250

Fire and Electrical Safety 450 1,000

Social Compliance 390 700

Hazard and Risk Identification 90 250

Occupational Health and Safety 80 130

In addition to updating and enhancing our audit and compliance processes in 2015, we also took

steps to shift the strategic focus of our VCS team from offering largely audit-based services to

remediation and capacity-building services. The aim is to provide our suppliers and factories

with the education, training and tools they need to upgrade their operations and comply with

our Standards, which is also critical for the success of their business.

6,965 factory representatives and5,044 employees attended

TRAINING SESSIONS591



Some examples of the training modules we offer to suppliers and factories include:

• A capacity-building course for factories to learn how to remediate zero tolerance issues

identified and to implement good practices to improve their performance and related audit

score and rating

• An orientation course to educate factories on Li & Fung’s compliance Standards, including

our Supplier Code of Conduct and accompanying Standards

• A course to introduce basic principles of safety management in factories, including the most

common issues of fire, electrical, and building and structural safety

This enhanced focus on capacity building enables us to provide suppliers and factories with

all-encompassing packages for total factory improvement in addition to deeper support, such

as on risk identification or fire safety management.

Our Sustainability Resource Center website provides our suppliers with compliance resources

and tools, industry updates and training schedules designed to help suppliers better understand

key compliance and operational issues, challenges and implications so that they can identify

specific areas of improvement and develop action plans to enhance their performance.

Information is regularly updated and materials are available in multiple languages.

Toolkits on how to improve key areas of business operations and health and safety are available

and cover topics such as, occupational health and safety, building safety management, fire

safety management, hazard identification and risk assessment, employee relations, and

workforce planning. A suite of short, practical videos that are available in 14 languages were

developed from the point of view of managers or workers to better communicate key issues.

Video topics include: underage labor, managing working hours, electrical safety, fire safety,

chemical safety, good governance and manufacturing excellence. In 2015, the videos were

viewed 3,298 times and downloaded 1,960 times.

Visit our website to view the Fire Safety for Workers video.

Sustainability Resource Center

Website Metrics in 2015

66,512PAGE VIEWS

VIDEO VIEWSAND/OR DOWNLOADS

5,258

7,492RESOURCEDOWNLOADS

10,601 WEBSITE VISITS



Sustainable SourcingOur approach to sustainable sourcing is to work with our customers, suppliers and industry

partners to further the adoption of standards and best practices. We also provide our customers

with sustainable design, manufacturing, products and packaging options. We do this to meet

customer requests for sustainably-sourced materials and products with reduced environmental

impact from well-managed factories.

Some of the ways we helped customers source products and packaging with sustainability

attributes over 2015 include:

Apparel • Garments made of cotton from certified organic sources, such as the

Global Organic Textile Standard (GOTS), that meet the Better Cotton

Initiative (BCI) standard, and/or have been produced by mills that have

joined Cotton LEADS™ as partners

• Garments comprising recycled yarn, polymers, leather and shearling

• Garments that are fur-free or comprise responsibly-sourced angora

wool or down feathers

• Textiles that are independently tested and certified to meet the

Oeko-Tex Standard 100 criteria and/or REACH requirements

• Textiles and shoes sourced from suppliers that are phasing out

hazardous chemicals in production for customers committed to

Greenpeace’s DETOX campaign

• Leather for shoes, wallets, covers and pouches produced from

tanneries that are audited against the environmental responsibility

practices of the Leather Working Group

Beauty Products • Items that are biodegradable, not tested on animals and free of

silicones, sulphates, parabens and colorants

• Products that meet industry standards and incorporate ingredients

such as community trade organic olive oil, community trade shea

butter and organic fine sugar, soya bean oil and rosehip oil in

formulation design

• Toothpaste that is the first to be certified as organic in the world under

the Oregon Tilth organic certification program



Household Items,

Furniture and

Packaging

• Household items, furniture and packaging made from wooden/

paper materials that are Forest Stewardship Council™ (FSC™)1

or Programme for the Endorsement of Forest Certification

(PEFC)-certified, and meet the chain-of-custody requirements of

the European Timber Regulation (EUTR) where applicable

• Household items, utensils and furniture made from natural materials

and fibres ranging from bamboo, roots and branches of organic

teak wood and wood from spent rubber trees, to banana bark and

water hyacinth

• Gadgets made of recycled plastic and photo frames comprising

recycled polystyrene foam, with recyclable packaging

• Packaging, luggage and other items using polyethylene terephthalate

(PET) instead of polyvinyl chloride (PVC), polypropylene (PP),

polycarbonate (PC) or acrylonitrile butadiene styrene (ABS), as well

as PVC-free packaging material for polybags, clips, gum tape, strings,

collar inlays and zippers

Additional examples of how we support customers and suppliers to further environmental and

social performance in the supply chain include:

• Reporting to customers on the processes in place and supplier compliance in meeting

legislative requirements related to chain-of-custody requirements for wood products2

and components containing reportable minerals3, and required testing standards, such as

BIFMA4 for furniture. This includes conducting product risk and traceability assessments for

customers by raw material categories

• Supporting suppliers to join tailored programs, on topics such as energy-efficiency

opportunities and energy consumption reporting, or manufacturing excellence to enhance

productivity and operational performance

• Sharing our Sustainable Suggestions for our Partners which provide ‘how to get started’

modules on energy and water efficiency, greenhouse gas reduction, sustainable buildings,

waste management, lean manufacturing and human resources

1 FSC license numbers FSC-C113132, FSC-C114681, FSC-C116575 and FSC-C129309.

2 As per the United States’ Lacey Act of 1900.

3 As per the United States’ Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010.

4 Business and Institutional Furniture Manufacturers Association (BIFMA).



Industry CollaborationWe recognize the power of collaboration to bring about meaningful change in the industry.

We are involved in key industry initiatives that bring our customers and industry partners

together to set standards and effect change. We also collaborate to implement focused

programs that address the particular challenges of our industry and the specific production

markets we operate in.

Cambodia

To raise awareness of building safety in Cambodia, Li & Fung has been actively engaging with

the Government of Cambodia since 2014. This effort has led to the establishment of an inter-

ministerial Working Group to develop Cambodia’s Building Safety Code. The inter-ministerial

working group comprises the Ministries of Land Management, Urban Planning and Construction,

Labor, Industry and Handicraft, Health, the Interior and the Environment. We have engaged the

International Code Council as our technical advisor to partner with the Working Group and to

draft the Building Safety Code.

Bangladesh

We remain actively engaged in Bangladesh, where we work with governmental and non-

governmental organizations, industry partners and suppliers to improve safety in factories.

We work closely with the Alliance for Bangladesh Worker Safety and the Bangladesh Accord on

Fire and Building Safety as an advisor to both Boards and as a fully active member. We also fund

both programs at the highest level – in line with the value of our sourcing in Bangladesh. In 2015

the focus for both initiatives was on education and the remediation of safety issues that surfaced

through in-depth safety audits. We jointly organized a number of activities to implement and

review progress over the course of the year. Over 2015, Li & Fung representatives participated

in 120 factory visits and 280 meetings to support the Alliance and the Accord. Additionally, three

training sessions were held and over 170 factories attended with over 330 participants in total.

This contributes to continual progress being made by factories to remediate issues identified

through the onsite assessments and addressed in training.

In addition to our support of the Alliance and Accord initiatives, we conducted training sessions

on fire, structural and electrical safety for factory management and workers and to strengthen

the capacity of our own QA/QC and merchandising teams in Bangladesh on social, fire, electrical

and structural safety compliance issues.



Better Work

Li & Fung continues to be a Buyer Partner of Better Work, a partnership between the ILO and

the International Finance Corporation that brings together governments, employers, workers

and buyers to improve compliance with labor standards and promote competitiveness in the

supply chain. In 2015, we supported factories in Cambodia, Indonesia, Jordan and Vietnam and

hosted a Better Work Asia Buyers’ Forum at our Hong Kong office.

Business for Social Responsibility (BSR)

We continue our partnership with BSR to implement the HERproject, which uses impactful

peer-to-peer training and a local partner network to empower primarily female workers

through education on nutrition, health and finance, and on improving workplace interaction,

harmony and efficiency. An early indication of positive impact from the project shows reduced

absenteeism and sick leave and improved workplace communication. The program will be

further expanded in 2016.

Country Program No. of Factories No. of Workers

Bangladesh HERhealth 43 90,000+

Cambodia HERhealth + Nutrition 12 19,000+

India HERhealth + HERfinance 18 39,000+

Vietnam HERhealth 16 26,000+

TOTAL 89 174,000+

Sustainable Apparel Coalition (SAC)

We have been actively involved in the development of the Higg Index, a suite of sustainability

tools to help organizations standardize how they measure and evaluate the environmental

performance of apparel products at the brand, product and facility levels.

In 2015, Li & Fung participated in the SAC’s regional and global meetings, provided input on the

Higg Analytics platform and worked with a customer and the SAC to pilot Advance Analytics

for Higg Index data. As SAC updates the tool, we will support its pilot testing in a number of

factories in our supply chain in 2016. We also support the Natural Resources Defense Council

and SAC to implement Clean by Design, an initiative to reduce environmental impacts from

manufacturing, in several textile mills in China.

We will continue to work with our partners to improve working conditions together in the

supply chain.

Our communities


Our communities


Our Hong Kong colleagues take a short break from volunteering to rebuild

houses for families in rural villages in Guangdong Province, China

Our communitiesWe engage our people to meaningfully contribute to our communities.

Our communities


We are committed to making a positive impact in the communities where we live and work. We invest in the potential of people, help communities in need and mobilize our colleagues and networks for change. We are in it together, helping to create sustainable, long-term change in the world.

Community engagement is a key part of Li & Fung’s Sustainability Strategy and is integral to

building sustainable communities and economies that will thrive for generations to come.

We believe that creating positive impact goes hand-in-hand with having a successful business.

Community engagement helps us attract and retain employees and helps them better

understand our local communities and their needs. Our communities and our people grow,

develop and transform through community engagement activities.

We provide resources and support for volunteering, we share our knowledge and skills, and

we raise funds to support initiatives, campaigns and disaster relief. Each activity is tracked to

measure the inputs, outputs, outcomes and impacts. We share our metrics with our people and

community partners and we use this information to review the focus and effectiveness of our

programs. We also use qualitative surveys and measures to track our longer-term outcomes.

Our community partners have a close connection with the beneficiaries of our activities and

also help to report and share stories and statistics on how we are creating impact.


Our communities (continued)

2015 Community Engagement Results

Our colleagues generously donated over US$368,000 to support community initiatives in 2015

including child education sponsorships, disaster relief, global campaigns for both women’s

and men’s health and a wide variety of programs to care for local communities. In addition,

our Company donated over US$611,000 to support charitable organizations and activities

around the world.

Many of our activities are sponsored by the Fung (1906) Foundation, which provides funding for

hands-on community service and matches funds from fundraising activities, which helps spur

on our people’s volunteerism and generous donations. In 2015, the Foundation’s support was

over US$476,000.

The effectiveness of our activities has increased year-on-year since we began reporting more

systematically in 2011. Our aggregated metrics since 2011 include our employees volunteering

over 131,000 times, giving over 62,000 hours to support 1,188 social and environmental

initiatives around the world. Since 2011, our employees have donated over US$1.5 million

to support communities and the Fung (1906) Foundation has provided over US$1.5 million to

further support some of these projects. Our corporate donations have totaled US$5.64 million.


ACTIVITIES374




++ +



Community Engagement in ActionOur local actions and global campaigns harness our core business strengths to support the

development of our people, communities and local economies. We engage the time and talent

of our people and establish networks of community partners.

In all of our locations, our community engagement ambassadors inspire our people, share

information, connect with community partners, organize activities and track outcomes and

results. In 2015, we continued to publish our community engagement newsletter and increased

its frequency to monthly, to inform, encourage, recognize and inspire our colleagues.

To maximize impact, we work directly with communities, and closely with 65 community

partners worldwide, to help us implement programs. We work with a large variety of partners

in each of our local markets and key global partners include: the Asian University for Women,

Business for Social Responsibility, Captivating International, Crossroads Foundation,

Habitat for Humanity, Movember Foundation, Red Cross/Red Crescent, Room to Read,

World Vision and World Wide Fund for Nature (WWF).

To support our people even more to make a difference, in 2015, we introduced a global policy

offering one day of volunteer leave a year to encourage every employee to volunteer at least

eight hours a year.



Supporting our people to meaningfully contribute to our communities is an important part

of our Sustainability Strategy. Our key focus areas are:

• Investing in the potential of people

• Helping communities in need

• Mobilizing for change

Investing in the Potential of People

Giving people the opportunity to learn and grow can help transform lives and contribute to

the wellbeing of our communities. Throughout our global network, we partner with local

organizations to help children, youth and adults who may be disadvantaged or disenfranchised

to access education, learn new skills, and grow personally and professionally. We provide

generous donations, sponsorships and volunteer our time to make a difference.

Our activities in 2015 included:

• Shared our skills, experience and expertise with students and youth through job shadowing,

career workshops, speaking engagements, mentorships, life coaching, work placements and

internships in Bangladesh and Hong Kong

• Sponsored girls’ education and daily living essentials in a safe and nurturing environment and

empowered girls with vocational training in China

• Visited schools and provided lessons to help children build a sustainable future in Bangladesh,

Germany, Guatemala, India and Thailand

Visit our website to read more about how we invest in the potential of people.

I’m so inspired to see our colleagues generously support their local communities. They live the change we want to see in the world.

Karen Seymour, Community Engagement Director

“



Helping Communities in Need

The communities where we live and work are as unique geographically as their specific needs.

To make a meaningful difference, we seek to raise awareness of social and environmental

issues to maximize impact. We do this by mobilizing our people through both global campaigns

supporting universal causes and locally-organized activities that target specific needs. Our global

campaigns include common causes such as men’s and women’s health, blood donations and

caring for the environment. We support a number of local initiatives that address social needs

and enhance livelihoods.


• Provided disaster relief funding and essential goods in response to global calamities that

included flooding in India and Malaysia, an earthquake in Nepal, and an explosion in Taiwan.

We helped improve schools and homes through refurbishment and hands-on building projects

in Bangladesh, Cambodia, China, India, Pakistan and Thailand. We also provided refurbished

computers, technology support and new supplies to school children in China, Hong Kong

and Turkey

• Spent time with and cared for disadvantaged children and the elderly in Bangladesh,

Cambodia, China, Hong Kong, Portugal, Singapore, Thailand and Vietnam. We donated goods

such as books, clothes, toys, scarves, toiletries and food to the elderly, refugee families,

children in need, the homeless, orphans, victims of natural disasters, and rural communities

in Bangladesh, Cambodia, China, Hong Kong, India, the Philippines, Portugal, Taiwan

and Vietnam

• Joined seminars, community-building activities and sporting events to raise awareness and

funds for causes around the globe, including cancer care, learning disabilities, illiteracy,

medical needs, disadvantaged children, elderly in need, accident victims, among others

• Cleaned coastlines and cities and planted trees in many of the locations where we live and

work through our annual “Clean up our World” campaign

• Donated blood and raised awareness for humanitarian need in many of our offices around

the globe. In Hong Kong, we supported the Red Cross with our 17th year of blood donations

• Joined a mission in the Philippines to serve communities in need by distributing essential

food, medicine and toiletries

Visit our website to learn more about how we help communities in need.



Mobilizing for Change

Li & Fung’s supply chain is the foundation of our business and a connector of communities

around the world. Working with our customers, suppliers and community partners we share our

skills and expertise, leverage our networks and people for action and impact, and create new

business opportunities to effect change. We focus on raising awareness and building capacity

for both workers and communities.

We strive to improve livelihoods, support people who were previously excluded from

employment to find meaningful work and develop new business opportunities that support

sustainable local economic development.


• Worked with partner factories in China and in our logistics operations in Taiwan and Thailand

to help disabled people find meaningful work producing and packing goods for our customers.

These workers were integrated with other workers in the factory, and they now have both

long-term income opportunities and work experience

• Partnered with Business for Social Responsibility to empower factory workers, most of whom

are female, in Bangladesh, Cambodia, India and Vietnam through the HERproject. These

workers benefit from education on nutrition, health and finance, and on improving workplace

interaction, harmony and efficiency. To date, over 174,000 workers and 89 suppliers are

involved, and positive results measured included reduced absenteeism and sick leave and

improved workplace communication

Visit our website to read about how we mobilize for change within the supply chain.

The support from Li & Fung brings not only sustenance, but allows our refugee clients to engage with local volunteers who make them feel welcome in this new home.

Jeffrey Andrews, Social Worker, Christian Action’s Centre for Refugees in Hong Kong

“

Our footprint


Our Cambodian colleagues partnered with two of our suppliers to plant over 200 trees,

helping to restore a precious mangrove ecosystem near Phnom Penh, Cambodia

Our footprintWe responsibly manage our operations to reduce our impact and raise awareness to champion change.

Our footprint


Our footprint


We take action to reduce the environmental impact of our operations. 2015 marks the sixth year of implementing our holistic Sustainability Strategy. Our strategy plays an important part in raising our colleagues’ awareness and enabling the company to make significant progress.

We are committed to managing our environmental footprint responsibly and we leverage our

resources and engage our people to make a difference along our value chain. As part of our

Sustainability Strategy, we focus our actions on:

• Raising the environmental awareness of our people and supporting them to take action

• Designing sustainable workplaces

• Managing our resources responsibly

Since conducting an Investment Grade Audit of our Hong Kong headquarters in 2010, we have

been implementing best practices throughout our global offices, distribution centers (DCs) and

manufacturing facilities. We adopt measures to enhance the sustainability of our workplaces

and to reduce consumption and waste, enhance recycling and expand our procurement of

items with sustainable attributes. We invest in energy-efficient building systems, equipment

and lighting, water-efficient equipment and fixtures and fuel-efficient transport. We conduct

assessments as part of all capital expenditure upgrades to adopt sustainable options. Systems

to measure, track and manage our environmental performance are implemented across our

operations with eight facilities certified to the ISO 14001 environmental management system (EMS)

or other environmental management standard1.

Our commitment to the environment is exemplified by our manufacturing facility in Trowbridge

being recognized as a Marks & Spencer ECO Factory since 2011 and our facility in Bangkok that

continues to enhance its comprehensive sustainability program. As a result of its environmental

achievements, the facility has been awarded a number of awards and certificates from the Thai

government, including the Good Environmental Governance Award and the Green Industry

Certificate by the Ministry of Industry for the fourth consecutive year. In 2015, the facility was

again awarded Level 4 out of 5 for the Green Industry Certificate, and it is worth noting that no

company is yet to achieve Level 5 out of 5.

In 2015, we are pleased to report that we reduced our greenhouse gas (GHG) emissions and

our electricity and water consumption against our 2014 baseline in both absolute quantities and

intensities.

1 Our manufacturing facilities in Bangkok, Jakarta and Kuala Lumpur, and three of our DCs in China and one in Thailand,

are certified to the ISO 14001 EMS standard.


Our footprint (continued)

Environmental AwarenessWe inspire and support our people to be mindful of how they can reduce environmental impact

in their daily lives and we support them by taking action to reduce consumption and waste, and

by expanding our procurement of items with sustainable attributes.

To support employee awareness and engagement, colleagues are involved in a variety of

activities including efforts to conserve resources in our operations, plant trees, clean parks,

river banks, beaches and coastlines, and protect coastal marine species.

To enable our 25,000-plus people around the world to share their best practices on

environmental protection, we revamped our internal communications platform, One Family, and

expanded its interactive features. Not only do we feature stories on environmental initiatives,

our colleagues can generate and share content through a live feed, by commenting on articles,

writing and following blogs, sharing videos, or creating and participating in communities around

topics that interest them.

Reducing environmental impact, for the benefit of our colleagues, our business and our communities around the world, is a priority.



Sustainable DesignIntegrating sustainability features into how we design, build and renovate our spaces – our

offices, DCs and manufacturing facilities – is an integral part of our effort to reduce our footprint

and maintain a healthy, safe and aesthetically-pleasing working environment for our people.

We maintain ergonomically-sound work areas and resource-efficient equipment and fixtures,

and select building and interior fit-out materials, furniture and other items, as directed by our

Sustainable Design, Construction and Renovation Guidelines for New Construction, Major

Renovation and Commercial Interiors and to meet third-party certification requirements.

As of 2015, we have a total of 13 LEED2/BREEAM3 certifications, including two platinum, five gold

and five silver LEED certifications, and in addition, a Silver Class Green Building certification for

our Rui Fang distribution center in Taiwan.

Our new beauty research and development facility in Thailand was certified to LEED Platinum

in 2015. The facility is projected to save over 68,165 kWh or the equivalent of 47 metric tons of

carbon dioxide (CO2) per year through the adoption of environmentally-responsible features,

including:

• Solar photovoltaic system to generate 48,214 kWh of electricity per year, representing 40% of

the building’s designed annual electrical power requirements, which is equal to a cost saving

of over US$5,000 per year

• Automation system that maintains optimum performance and efficiency levels for lighting,

air conditioning and ventilation. The system uses high-efficiency, air-cooled water chilling

equipment to provide 30% more fresh air than the minimum required standard, which

maintains a healthy and productive environment for our people

• Sensor system that constantly monitors CO2 levels in office and laboratory areas to ensure

safe levels are maintained

• LED lamps consuming 34% less energy than CFL and T5 lighting

• Paints and coatings with zero or minimal VOC (volatile organic compound) content.

Highly-reflective paints and glazing, which cover over 90% of the wall and window areas and

block 30% more solar heat radiance than ordinary glazing materials, save energy required for

air conditioning and provide abundant daylight conditions in working areas

2 Leadership in Energy and Environmental Design (LEED).

3 Building Research Establishment Environmental Assessment Method (BREEAM).



• Construction materials and furnishings were manufactured from post- and pre-consumer

recycled materials, which brought savings of 20% to 80% over other materials

• Water-saving fixtures installed for all sinks, lavatories and showers, and rainwater is captured

to irrigate landscaped areas

• Bicycle storage, shower facilities and preferred parking for vehicles that either adopt cleaner

fuels or are used for car/van pooling are provided to encourage more environmentally-

responsible forms of transportation

Resource ManagementOur Reporting Scope

2015 marks the second year of our current Three-Year Plan and of integrating environmental

data from our logistics and manufacturing facilities into our performance baseline4 for our

Trading and Logistics Networks, and for Li & Fung as a whole. Our reporting scope covers over

150 offices, six manufacturing facilities5 and over 250 DCs.

Visit our website for details on our performance in 2015 and against our 2014 baseline.

You can also read about best practices we implement to reduce the environmental footprint

of our offices and facilities.

Responsible Procurement

2015 saw the formalization of a global procurement function to leverage the scale of our

network and lead the development and implementation of procurement best practices.

The initial sustainability focus of the team has been to reinforce our Supplier Code of Conduct

with suppliers to our own operations. We assess our business suppliers against the Code,

and include its requirements in our RFP (request for proposal) and selection process. The

requirements are then formalized in our contracts with vendors. (Please refer to the “Our supply

chain” section of this Report to learn about our approach to managing our supply chains).

4 Over the years, we have reported year-on-year comparisons of environmental metrics for our Trading Network against

our initial 2010 baseline. As reported in our Annual Report 2014, following the July 2014 spin-off of some of the business

entities in Li & Fung Trading and Distribution Networks to Global Brands, we established 2014 as the new baseline for our

environmental reporting. This baseline does not include the six months of environmental data that was attributable to these

entities prior to their spin-off to Global Brands. Consumption attributable to Li & Fung with Global Brands for January to June

2014 is disclosed on page 95 of Annual Report 2014.

5 Our facilities that manufacture beauty and personal care products are located in Bangkok, Dongguan, Jakarta, Kuala Lumpur,

Tonawanda and Trowbridge.



To renew our effort to reduce paper consumption, action was undertaken in 2015 to:

• Assess printer and photocopier suppliers based on their ability to recycle devices and

used toner cartridges

• Share detailed paper consumption data to raise awareness and encourage our people to

reduce the quantity of paper they consume for printing and copying

• Implement a plan to reduce the number of people per printer from the current ratio of

seven per printer to at least 15 per printer

Improving Energy Efficiency and Reducing Emissions

Climate change is impacting our world and the resilience of ecosystems. Changes in

temperature and weather are affecting species and biodiversity, natural and built environments,

food production, resource availability and transportation, among other impacts. The physical

and financial impact of this is affecting the sourcing and delivery of goods and services in our

industry. We consider these risks in the procurement and consumption of resources, in material

sourcing and product manufacturing and in the transportation of products to our customers.

We are committed to responsibly managing our footprint within our operations. Our

consumption of energy and the composition of our GHG and air emissions globally are

characterized by our trading business having over 150 offices and six manufacturing facilities,

and our logistics business having vehicle fleets and over 250 DCs. For all of our facilities, systems

are in place to monitor consumption and emissions. All facilities met the relevant regulatory

requirements in 2015.

We calculate our GHG emissions according to international standards as well as appropriate

national and local guidelines6 and emission factors. Scope 1 comprises emissions from the

consumption of fuel by company-owned vehicles and boilers and of refrigerants by chillers.

Scope 2 emissions arise from purchased electricity and natural gas for heating and cooling.

In 2015 and against our 2014 results, both our overall electricity consumption and GHG

emissions reduced, in absolute quantities and intensities, against our 2014 baseline. These

reductions are attributable to our ongoing investment in efficient equipment, technologies,

systems and vehicular fleets, consolidation of our offices and to the commitment of our people

to make behavioral changes to conserve energy.

6 Standards and guidelines adopted include the International Energy Agency’s CO2 Emission from Fuel Combustion, The

Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, the Defra Voluntary Reporting Guidelines and the

Hong Kong Government’s Guidelines to Account for and Report on Greenhouse Gas Emissions and Removals for Buildings.

7 Tons CO2 Equivalent/m2

8 kWh/m2

GHG Emissions

Electricity Consumption

LogisticsTrading

2014 2015

148,045,108

145,375,771

-2,669,337kWh

-13%Intensity Change8

LogisticsTrading

2014 2015

93,009

89,164

-3,845 Tons CO2 Equivalent




Examples of initiatives to reduce electricity and GHG emissions in 2015 included:

• Overall and progressive retrofitting of existing lighting with LED throughout our operations

with, for example and as at the end of 2015, our Jakarta facility being 70% along its complete

conversion to LED lighting

• Consolidating equipment and installing energy-efficient blade servers and virtual machines in

our server rooms, as well as conserving energy by improving airflow and enclosing areas that

have high-intensity cooling requirements

• Upgrading heating and cooling systems to improve efficiency and adopt cleaner energy

sources, ranging from solar thermal and photovoltaics at our Bangkok facility to converting

the boiler at our Jakarta facility to natural gas9

• Installing a hot box to warm ingredients used in the manufacturing of personal care products

at our Tonawanda facility to make the process both more energy efficient and safer than with

electric-powered heating bands or steam collars

• Introducing an electric delivery van to Logistics’ vehicle fleet in Hong Kong with plans to

expand the fleet

• Operating forklift vehicles that have rechargeable electric batteries, and safely reusing

fit-for-purpose parts from retired forklifts for vehicles in operation

• Using handheld monitoring devices with rechargeable batteries that are linked to centralized

databases to monitor inventory and thereby reduce paper consumption and enhance the

efficiency of warehouse operations

9 Five of our six manufacturing facilities operate boilers, four of them consuming natural gas and

the other liquid petroleum gas (LPG).



In 2015 we introduced new tools to reduce overall travel and its contribution to greenhouse gas

generation. In addition to our video conferencing facilities, IP phones have video functionality,

VidyoDesktop is used for online video calls and colleagues use Webex to enhance sharing during

conference and video calls.

In 2015, we exceeded the 10% intensity reduction targets we set to achieve by the end of 2016

for both our GHG emissions and electricity usage and we aim to maintain this positive trend

throughout 2016. We continue to evaluate and implement new opportunities to conserve

energy, adopt cleaner energy sources and are committed to reduce GHG emissions and our

contribution to global climate change.

Visit our website for details on our 2015 electricity consumption and GHG emission metrics,

and the composition of our Scope 1 and 2 GHG emissions.

Efficiently Using Resources and Reducing Waste

We are committed to using resources wisely and efficiently and reducing waste generation.

We have been progressively implementing water-efficiency measures throughout our

operations, including the installation of water-efficient faucets, fixtures and fittings in our offices

and equipment in our facilities, capturing rainwater for landscape irrigation to reduce water

consumption and encouraging behavioral change in our people.

Against our 2014 baseline, overall we achieved absolute and intensity reductions in water

consumption in 2015. This reduction is attributed to our ongoing investment in efficient

equipment, technologies, systems, the consolidation of our offices, a reduced headcount for the

Company and the commitment of our people to make behavioral changes to conserve water.

Additionally, our manufacturing facilities have systems in place to reduce water consumption

and the water system in our Jakarta facility was upgraded in 2015. Our facilities also undertake

measures to reduce waste generation in the production process, to treat and monitor

wastewater discharges and to handle, store and dispose of chemical and solid materials and

waste. In 2015, all facilities met the relevant regulatory requirements.

10 m3/Headcount

Water Consumption

LogisticsTrading

2014 2015

1,606,833

1,391,133

-215,700m3




Our offices use paper that is certified by a Forest Stewardship Council™ (FSC™) accredited certification body to be FSC Mix Paper from responsible sources. We also provide products that comprise materials, including wood, paper, cardboard and/or packaging that are verified to be from FSC11 or PEFC12 certified sources. In 2015 and over our 2014 baseline, our overall paper consumption increased by less than 2%. The increase is partly attributable to the inclusion of paper consumed as part of a comprehensive service agreement for multi-function machines in Hong Kong in the data for 2014 and 2015. Previously paper consumption data had comprised the quantity of A4-equivalent paper purchased directly for use in printer and copier machines globally. While this impacts the achievement of our 2016 paper intensity reduction target, we aim to reduce consumption through a renewed initiative to expand the internal tracking and reporting of paper consumption and to consolidate the number of machines used, as stated on page 106.

Each of our offices and facilities seek to minimize waste generation and maximize reuse and recycling in their local markets by collecting used paper, printer/copier toners, packaging, aluminum cans, plastic bottles and other materials that can be recycled locally. In Hong Kong, recyclables are collected by a local company and a social enterprise, we maintain six ‘Class of Excellence’ certifications under the Hong Kong government’s Wastewi$e scheme for offices, and in 2015 our DC was awarded both the Gold Award and the Cleanliness Award from the Yan Oi Tong EcoPark Plastic Resource Recycling Center.

At our manufacturing facilities, various measures are used to better manage materials and minimize waste generation, ranging from flexible processing lines that adapt for multiple product runs to lean manufacturing projects to reduce consumption and waste, to the proper handling, storage and disposal of materials and chemicals to meet legal and REACH13 requirements. Furthermore, our manufacturing and logistics facilities reuse and recycle pallets made from plastic and wood-based materials, recycle waste materials and minimize packaging for the internal storage and delivery of finished goods.

We will continue to review our performance, implement measures and support our people to use resources efficiently and responsibly and to reduce waste generation14. We have exceeded and expect to maintain our water intensity reduction target of 5%. We will expand our efforts to move towards our paper intensity reduction target of 10% by 2016 over our 2014 baseline.

Visit our website for details on our 2015 water and paper consumption metrics.

11 FSC license numbers FSC-C113132, FSC-C114681, FSC-C116575 and FSC-C129309.

12 Programme for the Endorsement of Forest Certification (PEFC).

13 European Regulation on Registration, Evaluation, Authorisation and Restriction of Chemicals.

14 In 2014 we set a target to reduce the intensity of our generation of waste by 10%. While our waste reduction efforts

are ongoing, measuring our global waste stream is a work in progress.


Information for investors

A Chinese version of this Report can be downloaded from the Company’s website and

can be obtained from the Company’s Hong Kong branch share registrar, Tricor Abacus

Limited. In the event of any difference, the English version prevails.

本報告中文版可從本公司網站下載，及向本公司於香港之股份過戶登記處卓佳雅柏勤

有限公司索取。如中英版本有任何差異，請以英文版本為準。

Listing InformationListing: Hong Kong Exchange

Stock Code: 494

Ticker Symbol

Reuters: 0494.HK

Bloomberg: 494 HK Equity

Index RecognitionHang Seng Index

Hang Seng High Dividend Yield Index

MSCI Index Series

MSCI Global Sustainability Indexes

FTSE4Good Index Series

Hang Seng Corporate Sustainability Index Series

Key Dates20 Aug 2015 Announcement of the 2015 Interim Results

18 Sep 2015 Payment of the 2015 Interim Dividend

17 Mar 2016 Announcement of the 2015 Final Results

18 May 2016 Record Date for the 2016 Annual General Meeting

19 May 2016 Annual General Meeting

23 May 2016 Dividend Ex-entitlement for Shares

25-26 May 2016 (both days inclusive) Closure of

the Register of Shareholders

2 Jun 2016 Proposed Payment of the 2015 Final Dividend

Registrar and Transfer OfficesPrincipal

Appleby Management (Bermuda) Limited

Canon’s Court, 22 Victoria Street

Hamilton HM 12, Bermuda

Hong Kong Branch

Tricor Abacus Limited

Level 22, Hopewell Centre

183 Queen’s Road East, Hong Kong

Telephone: (852) 2980 1333

[email protected]

Share InformationBoard lot size: 2,000 Shares

Shares outstanding as at 31 December 2015

8,415,447,306 Shares

Market capitalization as at 31 December 2015

HK$44,349,407,303

Basic earnings per Share for 2015

Interim 1.78 US cents

Full Year 5.04 US cents

Dividend per Share for 2015

Interim 13 HK cents | Final 15 HK cents

Total 28 HK cents

EnquiriesInstitutional Investors and Securities Analysts:

Investor Relations | [email protected]

Media and Potential Business Partners:

Corporate Communications | [email protected]

Shareholders Addressed to the Board:

Company Secretariat | [email protected]

Li & Fung Limited

11th Floor, LiFung Tower

888 Cheung Sha Wan Road

Kowloon, Hong Kong

Telephone: (852) 2300 2300

Websiteswww.lifung.com | www.irasia.com/listco/hk/lifung


Report of the Directors

The Directors submit their report together with the audited financial statements for the year ended 31 December 2015.

Principal Activities, Analysis of Operations and Business ReviewThe principal activity of the Company is investment holding. The activities of its principal subsidiaries are set out in Note 42 to the

financial statements.

Details of the Continuing Operations’ turnover and contribution to operating profit of the Group for the year by segments are set out in

Note 3 to the financial statements.

Further discussion and analysis of these activities as required by Schedule 5 to the Hong Kong Companies Ordinance, including a

fair review of the business and a discussion of the principal risks and uncertainties facing the Group, particulars of important events

affecting the Group that have occurred since the end of the financial year 2015, and an indication of likely future development in the

Group business, can be found in the preceding sections of this Annual Report set out in pages 4 to 109. The preceding sections form

part of this Report.

Shares Issued in the Year55,049,000 new shares were issued at nominal value for the Share Award Scheme for the year ended 31 December 2015. No

consideration was received by the Company for the issue. Details of the shares issued in the year ended 31 December 2015 are set out

in Note 24 to the financial statements.

Results and AppropriationsThe results of the Group for the year are set out in the consolidated profit and loss account on pages 127 to 128.

The Directors declared an interim dividend of HK$0.13 (equivalent to US$0.017) per ordinary share, totalling US$140,921,000 which was

paid on 18 September 2015.

The Directors recommend the payment of a final dividend of HK$0.15 (equivalent to US$0.019) per share, totalling US$162,670,000.

Distributable ReservesAt 31 December 2015, the reserves of the Company available for distribution as dividends amounted to US$3,001,841,000, comprising

retained earnings of US$2,027,652,000 and contribution surplus of US$974,189,000 arising from: (i) the exchange of shares for the

acquisition of Li & Fung (B.V.I.) Limited; (ii) the issuance of shares for the acquisition of Colby Group Holdings Limited; (iii) the transfer

from share premium of US$3,000,000,000 offset by the distribution in specie of US$2,290,000,000 (Note 25).

Under the Companies Act 1981 of Bermuda (as amended), the contribution surplus shall not be distributed to the Shareholders if there

are reasonable grounds for believing that:

(i) the Company is, or would after the payment be, unable to pay its liabilities as they become due; or

(ii) the realizable value of the Company’s assets would thereby be less than the aggregate of its liabilities and its issued share capital

and share premium account.


Report of the Directors (continued)

DonationsCharitable and other donations made by the Group during the year amounted to US$611,000.

Ten-year Financial SummaryA summary of the results for the year ended and of the assets and liabilities of the Group as at 31 December 2015 and for the previous

nine financial years are set out in the Ten-year financial summary section on pages 224 to 225.

Pre-emptive RightsThere is no provision for pre-emptive rights under the Company’s Bye-laws and there is no restriction against such rights under the laws

of Bermuda.

Purchase, Sale or Redemption of the Company’s Listed SecuritiesThe Company has not redeemed any of its listed securities during the year. Neither the Company nor any of its subsidiaries has

purchased or sold any of the Company’s listed securities during the year.

Long-term Incentive Schemes(A) Share Option Schemes

2003 OPTION SCHEME

Pursuant to the terms of the 2003 Option Scheme, the 2003 Option Scheme is valid and effective for a period of 10 years commencing

on the adoption date and expiring on the tenth anniversary of the adoption date. Accordingly, the 2003 Option Scheme expired on

11 May 2013 and no further options could thereafter be granted under the 2003 Option Scheme. However, all remaining provisions remain

in full force and effect to govern the exercise of all the Share Options granted under the 2003 Option Scheme prior to its expiration.

As at 31 December 2015, there were Share Options relating to 16,000,000 Shares granted by the Company representing 0.19% of the

issued Shares as at the date of this Report pursuant to the 2003 Option Scheme, which were valid and outstanding.

2014 OPTION SCHEME

The 2014 Option Scheme was adopted by the Shareholders at the annual general meeting of the Company held on 15 May 2014. As at

31 December 2015, there were Share Options relating to 89,184,000 Shares granted by the Company representing 1.06% of the issued

Shares as at the date of this Report pursuant to the 2014 Option Scheme, which were valid and outstanding.



Details of the Share Options granted under the 2003 Option Scheme and the 2014 Option Scheme that remain outstanding as

at 31 December 2015 are as follows:

Number of Share Options

Exercise

Grant DatePrice HK$ Grantees

As at 1/1/2015 Granted Lapsed

As at 31/12/2015 Exercisable Period

2003 Option Scheme

11/4/2011 16.901 William Fung Kwok Lun 412,000 – (412,000) – 1/5/2012–30/4/2015

Spencer Theodore Fung 274,000 – (274,000) –

Marc Robert Compagnon 274,000 – (274,000) –

Continuous Contract

Employees

21,358,000 – (21,358,000) –

21/11/2011 12.711 Continuous Contract

Employees

1,380,000 – (1,380,000) – 1/5/2012–30/4/2015

22/12/2011 12.121 Spencer Theodore Fung

Marc Robert Compagnon

9,000,000

9,000,000

–

–

(1,000,000)

(1,000,000)

8,000,000

8,000,000

Exercisable in nine equal tranches

during the period from 1/5/2013 to

30/4/2023 with each tranche having

an exercisable period of two years

2014 Option Scheme

21/5/2015 7.492 William Fung Kwok Lun

Spencer Theodore Fung


Continuous Contract

Employees

–

–

–

–

7,509,000

4,569,000

3,945,000

74,084,000

–

–

–

(1,812,000)

7,509,000

4,569,000

3,945,000

72,272,000

Exercisable in three tranches

during the period from 1/1/2016 to

31/12/2019 with each tranche having


16/11/2015 5.813 Continuous Contract

Employees

– 889,000 – 889,000 Exercisable in two tranches during

the period from 1/1/2017 to 31/12/2019

with each tranche having


Total 41,698,000 90,996,000 (27,510,000) 105,184,000

NOTES:(1) Following the spin-off and separate listing of Global Brands, the exercise price applicable to the Share Options outstanding on the record date for the distribution in specie

(i.e. 7 July 2014) was adjusted from HK$20.21 to HK$16.90, from HK$15.20 to HK$12.71 and from HK$14.50 to HK$12.12 with effect from 31 August 2014.

(2) The closing market price per Share as at the date preceding the date on which the Share Options were granted and stated in the Stock Exchange’s daily quotation sheet

on 20 May 2015 was HK$7.29.

(3) The closing market price per Share as at the date preceding the date on which the Share Options were granted was HK$5.58.

(4) The above Share Options granted are recognized as expenses in the financial statements in accordance with the Company’s accounting policy as set out in Note 1 to the

financial statements. Other details of Share Options granted by the Company are set out in Note 24 to the financial statements.



The major terms of the 2003 Option Scheme and the 2014 Option Scheme (collectively, the “Share Option Schemes”) are summarized as

follows:

(i) Purpose

The purpose of the Share Option Schemes is to attract and retain the best quality personnel for the development of the Group’s

businesses; to provide additional incentives to the selected qualifying participants; and to promote the long-term financial success of the

Group by aligning the interests of the option holders to the Shareholders.

(ii) Qualifying Participants

Any employee including any Executive or Non-executive Director of the Company or any affiliate, any consultant, agent, representative,

advisor, customer, contractor, business ally or joint venture partner of the Group or any affiliate under the Share Option Schemes.

(iii) Maximum Number of Shares

The total number of Shares which may be issued upon exercise of all options to be granted under the 2003 Option Scheme and the 2014

Option Scheme must not in aggregate exceed 10% of the issued share capital of the Company at the respective date of approval of each

of the Share Option Schemes. Following the expiration of the 2003 Option Scheme, no further share options can be granted under the

2003 Option Scheme.

The number of Shares available for issue under the 2014 Option Scheme is 746,855,830 Shares, representing 8.87% of the issued Shares

as at the date of this Report.

Notwithstanding the foregoing, the maximum number of Shares which may be issued upon exercise of all outstanding options granted

and yet to be exercised under the Share Option Schemes and any other share option scheme(s) of the Company must not, in aggregate,

exceed 30% of the total number of issued shares of the Company from time to time.

(iv) Limit for Each Participant

The total number of Shares issued and to be issued upon exercise of options (whether exercised or outstanding) granted in any

12-month period to each participant must not exceed 1% of the Shares in issue.

(v) Option Period

The period within which the Shares must be taken up, an option shall be determined by the Board in its absolute discretion at the time

of grant, but such period must not exceed 10 years from the date of grant of the relevant option.

The Board has the authority to determine the minimum period for which an option must be held before it can vest. The Share Option

Schemes do not specify any minimum holding period.

(vi) Acceptance and Payment on Acceptance

An offer of the grant of an option shall remain open for acceptance for a period of 28 days from the date of offer (or such longer period as

the Board may specify in writing).

HK$1.00 is payable by the grantee to the Company on acceptance of the offer.

(vii) Subscription Price

The exercise price must be at least the higher of (i) the closing price of the Shares as stated in the Stock Exchange’s daily quotations

sheet on the date of grant; (ii) the average closing prices of the Shares as stated in the Stock Exchange’s daily quotation sheets for the

five business days immediately preceding the date of grant; and (iii) the nominal value of the Share.



(viii) Remaining Life of the Share Option Schemes

The 2003 Option Scheme expired on 11 May 2013 and all outstanding Share Options granted under the 2003 Option Scheme and yet to

be exercised shall remain valid.

Under the 2014 Option Scheme, the Board is entitled at any time within 10 years between 15 May 2014 and 14 May 2024 to offer the

grant of an option to any qualifying participants.

(B) Share Award Scheme

The Share Award Scheme was adopted by the Shareholders at the annual general meeting of the Company held on 21 May 2015.

During the year, a total of 63,718,000 Award Shares were awarded to eligible persons pursuant to the Share Award Scheme, and out of

which 7,634,000 Award Shares were awarded to connected persons including Spencer Theodore Fung and Marc Robert Compagnon

who are Executive Directors of the Company. The 7,634,000 Award Shares were purchased from the open market. 55,049,000 Award

Shares were allotted and issued at nominal value on 22 May 2015 to non-connected persons. The balance of 1,035,000 Award Shares

were satisfied by the Award Shares which had not been vested and/or been forfeited in accordance with the terms of the Share Award

Scheme.

During the year, a total of 2,378,000 Award Shares were unvested and/or forfeited and out of which, 1,035,000 Award Shares were

applied to the awards to non-connected persons. As at 31 December 2015, a balance of 1,343,000 Award Shares were forfeited and held

by the trustee to be applied towards future awards.

The movement in the Award Shares under the Share Award Scheme during the year are as follows:

Number of Award Shares

Grant Date GranteesAs at

1/1/2015 Granted VestedUnvested/ Forfeited*

As at 31/12/2015 Vesting Date

21/5/2015 Spencer Theodore Fung


Connected Persons other

than Directors

Non-connected Persons

–

–

–

–

810,000

690,000

6,134,000

55,049,000

(90,000)

(76,800)

(680,400)

(5,343,600)

–

–

–

(2,378,000)

720,000

613,200

5,453,600

47,327,400

To be vested in five tranches with

the vesting date on 31 December of

each year from 2015 to 2019

16/11/2015 Non-connected Persons – 1,035,000 – – 1,035,000 To be vested in four tranches with

the vesting date on 31 December of

each year from 2016 to 2019

Total – 63,718,000 (6,190,800) (2,378,000) 55,149,200

* Award Shares that are not vested and/or are forfeited in accordance with the terms of the Share Award Scheme are held by the Trustee to be applied towards future awards in

accordance with the provisions of the Share Award Scheme. During the year, 1,035,000 Award Shares had been applied from the 2,378,000 Award Shares which were unvested

and/or forfeited.



The major terms of the Share Award Scheme are summarized as follows:

(i) Purpose

The purpose of the Share Award Scheme is (i) to align the interests of eligible persons with those of the Group through the ownership

of Shares, dividends and other distributions paid on Shares and/or the increase in value of the Shares, and (ii) to encourage and retain

eligible persons to make contributions to the long-term growth and profits of the Group.

(ii) Eligible Persons

Any individual, being an employee, director, officer, consultant or advisor of any member of the Group or any affiliate (as defined in the

Share Award Scheme) who the Board considers, in its sole discretion, to have contributed or will contribute to the Group.

(iii) Awards

An award granted by the Board to eligible persons which may vest in the form of Award Shares or the actual price of the Award Shares

which are sold on the vesting of an award pursuant to the Share Award Scheme.

(iv) Granting of Awards

The Board may, from time to time, grant awards to any eligible person who the Board considers to have contributed or will contribute to

the Group.

Each grant of an award to any Director or connected person of the Company shall be subject to the prior approval of the Independent

Non-executive Directors of the Company (excluding any independent non-executive director who is a proposed recipient of the

grant of an award). The allotment and issue of new Shares in satisfaction of awards granted to connected persons of the Company

(whether connected at the Company or subsidiary level), which constitutes a connected transaction of the Company under Chapter

14A of the Listing Rules, will be subject to independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules

notwithstanding the mandate was granted to the Directors at the 2015 annual general meeting of the Company to allot and issue up to

3% of the total number of issued Shares as at 21 May 2015.

(v) Maximum Number of Shares to be Awarded

The maximum number of Shares, whether they are new Shares to be allotted and issued by the Company, or Award Shares that are

not vested and/or are forfeited and held by the independent trustee to be applied towards future awards, or existing shares to be

purchased on the market by the independent trustee, underlying all grants made pursuant to the Share Award Scheme (excluding

Award Shares which have been forfeited in accordance with the Share Award Scheme) shall not exceed 3% (i.e. 250,811,949 Shares) of

the total number of issued Shares as at the Adoption Date. As at the date of this Report, 189,471,949 Award Shares are available for the

furthering grant of awards under the Share Award Scheme, representing approximately 2.25% of the Shares in issue.

The above limit can be renewed or refreshed subject to approval of Shareholders within 10 years from the Adoption Date.

(vi) Limit for Each Participant

Under the Share Award Scheme, there is no specified limit on the maximum number of Award Shares which may be granted to a single

eligible person but unvested under the Share Award Scheme.

(vii) Termination

Subject to any early termination as may be determined by the Board, the Share Award Scheme will be valid and effective for 10 years

commencing on Adoption Date.



SubsidiariesDetails of the Company’s principal subsidiaries at 31 December 2015 are set out in Note 42 to the financial statements.

Associated CompaniesDetails of the Company’s principal associated companies at 31 December 2015 are set out in Note 42 to the financial statements.

Joint VentureDetails of the Company’s principal joint venture at 31 December 2015 are set out in Note 42 to the financial statements.

Major Customers and SuppliersDuring 2015 and 2014, the Continuing Operations of the Group purchased less than 30% of its goods and services from its five largest

suppliers. The percentage of sales attributable to the largest customer and the five largest customers combined for the Continuing

Operations of the Group were 13% (2014: 14%) and 36% (2014: 35%) respectively.

Victor Fung Kwok King, William Fung Kwok Lun and Spencer Theodore Fung were each deemed to have more than 5% interest in

Global Brands Group, which is one of the Group’s five largest customers.

Save as disclosed above, during 2015, none of the Directors, their associates or any Shareholders (which to the knowledge of the

Directors own more than 5% of the Company’s issued share capital) had a material interest in the Group’s five largest customers.

Connected Transactions and Continuing Connected TransactionsDuring the year, the Group had the following connected transactions and continuing connected transactions which were subject to

reporting and announcement requirements but are exempt from the independent Shareholders’ approval requirement.

(i) The Company entered into a distribution and sale of goods agreement with FH (1937) and its associates on 5 December 2014 for a

term of three years commencing on 1 January 2015 and ending on 31 December 2017. FH (1937) and its associates are connected

persons of the Company and the transactions contemplated under the distribution and sale of goods agreement constituted

continuing connected transactions of the Company under the Main Board Listing Rules. In such respect, the Group recorded sales

of US$28,128,000 for the year ended 31 December 2015 which did not exceed the annual cap for 2015 of US$80 million.

(ii) Pursuant to the master agreement for the leasing of properties that the Company entered into with FH (1937) on 6 December 2013,

the Group leased certain properties from FH (1937) and its associates for a term of three years from 1 January 2014 to 31 December

2016. The transactions contemplated under the master lease agreement for the leasing of properties constituted continuing

connected transactions of the Company under the Main Board Listing Rules. In such respect, the Group paid rental expenses of

US$26,018,000 for the year ended 31 December 2015 which did not exceed the annual cap for 2015 of US$50 million.

(iii) On 24 June 2014, a subsidiary of the Company entered into the buying agency agreement with a subsidiary of Global Brands, an

associate of FH (1937), for the sourcing and supply chain management services for a term of three years from the listing date of

Global Brands. Global Brands Group is a connected person of the Company after its spin-off from the Group on 8 July 2014 and the

transactions contemplated under the buying agency agreement constituted continuing connected transactions of the Company

under the Main Board Listing Rules. For the year ended 31 December 2015, the Group provided buying agency services to Global

Brands Group with an aggregate turnover of approximately US$1,627,351,000. The aggregate commission payable to the Group

under the buying agency agreement did not exceed the annual cap for 2015 of US$150 million and 7% of the FOB price on all

products and components sourced through the Group.



(iv) On 24 June 2014, the Company entered into the master property agreement with Global Brands, for the sub-lease and licensing

of offices to and from Global Brands Group from the listing date of Global Brands to 31 December 2016. The transactions

contemplated under the master property agreement constituted continuing connected transactions of the Company under the

Main Board Listing Rules. For the year ended 31 December 2015, aggregate rental and license fees paid to and from one another

approximated US$5,751,000, which did not exceed the annual cap for 2015 of US$14 million.

(v) On 20 August 2015, the Company entered into a master agreement with FH (1937) for provision of logistics-related services to

FH (1937) and its associates for a term of three years commencing from 1 January 2015 and ending on 31 December 2017. The

transactions contemplated under the master agreement constituted continuing connected transactions of the Company under

the Main Board Listing Rules. In such respect, the Group recorded logistics-related services income of US$10,894,000 for the year

ended 31 December 2015 which did not exceed the annual cap for 2015 of US$20 million.

Non-exempt continuing connected transactions of the Company have been reviewed by the Independent Non-executive Directors of the

Company. The Independent Non-executive Directors confirmed that the aforesaid non-exempt continuing connected transactions were

entered into (a) in the ordinary and usual course of business of the Group; (b) either on normal commercial terms or on terms no less

favourable to the Group than terms available to or from independent third parties; and (c) in accordance with the relevant agreements

governing them on terms that are fair and reasonable and in the interests of the Shareholders of the Company as a whole. Proper

internal control procedures are in place to identify, approve and record all these transactions.

The Company’s auditor was engaged to report on the Group’s continuing connected transactions in accordance with Hong Kong

Standard on Assurance Engagements 3000 (Revised) “Assurance Engagements Other than Audits or Reviews of Historical Financial

Information” and with reference to Practice Note 740 “Auditor’s Letter on Continuing Connected Transactions under the Hong Kong

Listing Rules” issued by the Hong Kong Institute of Certified Public Accountants. The auditor has issued his unqualified letter containing

his findings and conclusions in respect of the continuing connected transactions in accordance with the Main Board Listing Rule 14A.56.

A copy of the auditor’s letter has been provided by the Company to the Stock Exchange.

Pension Scheme ArrangementsWith effect from 1 December 2000, the mandatory provident fund (the “MPF Scheme”) was set up by the Mandatory Provident Fund

Authority of Hong Kong. The MPF Scheme is a defined contribution retirement benefit scheme and administered by independent

trustees. Both the employer and the employees have to contribute an amount equal to 5% of the relevant income of such employee to

the MPF Scheme. Contributions from the employer are 100% vested in the employees as soon as they are paid to the MPF Scheme and

subject to certain conditions being met, all benefits derived from the mandatory contributions must be preserved until the employee

either reaches the normal retirement age of 65 or meets certain specified conditions whichever is earlier.

In Taiwan, the Group operates a defined contribution provident scheme for its employees with the contributions set at 6% of the

employees’ basic salaries. In addition, the Group also participates in a retirement benefit plan in accordance with local statutory

requirements. Under this plan, the Group’s monthly pension cost contribution is 3% of employees’ salaries, which is contributed

monthly to an independent fund.

In Korea, the Group and each of its employees are required to contribute 4.5% of the employee’s monthly salary to a government

established pension corporation pursuant to the statutory requirement. Upon retirement, an employee is entitled to receive a lump sum

payment.

In Indonesia and Thailand, the Group participates in a defined contribution provident scheme for its employees with the contribution

set at 3.7% and 7% of the employees’ basic salaries, respectively. In addition, the Group also participates in a defined benefit retirement

scheme in accordance with local statutory requirements.



In China, the Group participates in defined contribution retirement schemes operated by the local authorities for employees.

Contributions to these schemes are pursuant to the statutory requirements.

The provident fund schemes for staff of the Group in other regions follow local requirements.

Contributions to the various arrangements of 2015 were:

US$’000

Contributions to the MPF Scheme 6,051

Contributions forfeited by employees (1,745)

Contributions to the defined contribution provident scheme and defined benefits plan in Taiwan 797

Contributions pursuant to the statutory requirements in Korea 1,276

Contributions to the defined contribution provident scheme and defined benefits plan in Indonesia and Thailand 521

Contributions pursuant to statutory requirements in China 36,170

Contributions pursuant to local requirements in other overseas regions 21,338

64,408

DirectorsThe Directors during the year and up to the date of this Report were:

Non-executive Directors: Executive Directors:

Victor Fung Kwok King (Honorary Chairman)

Paul Edward Selway-Swift*

Allan Wong Chi Yun*

Franklin Warren McFarlan* (retired on 21 May 2015)

Martin Tang Yue Nien*

Margaret Leung Ko May Yee*

* Independent Non-executive Directors

William Fung Kwok Lun (Group Chairman)

Spencer Theodore Fung (Group Chief Executive Officer)


All Directors of the Company, including Independent Non-executive Directors, are subject to retirement by rotation at annual general

meetings in accordance with Bye-law 110(A) of the Company’s Bye-laws.

Victor Fung Kwok King, Allan Wong Chi Yun and Margaret Leung Ko May Yee will retire by rotation at the forthcoming annual general

meeting. All of them, being eligible, will offer themselves for re-election.

As stated in the 2012 annual report of the Company, Paul Edward Selway-Swift will stand for re-election for a term of around one year

at each annual general meeting. Accordingly, Paul Edward Selway-Swift will also retire at the forthcoming annual general meeting and

being eligible, will offer himself for re-election.

The Board has received from each Independent Non-executive Director a written annual confirmation of their independence pursuant to

Rule 3.13 of the Listing Rules. The Nomination Committee, therefore, is of the view that they meet the independence guidelines set out

in Rule 3.13 of the Listing Rules and considers that each Independent Non-executive Director is independent to the Company.

The biographical details of the Directors as at the date of this Report are set out in Our board and management team section on

pages 60 to 69.



Permitted Indemnity ProvisionA permitted indemnity provision for the benefit of the Directors is currently in force and was in force throughout the year. The Company

has maintained liability insurance to provide appropriate cover for the directors of the Company and its subsidiaries.

Directors’ Service ContractsUnder a service contract dated 2 June 1992 between the Company and William Fung Kwok Lun and a service contract dated 2 June 1992

between Li & Fung (B.V.I.) Limited and William Fung Kwok Lun, William Fung Kwok Lun has been appointed to act as Managing Director

of the Company, Li & Fung (Trading) Limited, LF Properties Limited and Li & Fung (B.V.I.) Limited, in each case for an initial period of five

years from 1 April 1992 and thereafter unless terminated by not less than 12 calendar months’ notice in writing expiring at the end of

such initial period or any subsequent month.

Apart from the above, none of the Directors who are proposed for re-election at the forthcoming Annual General Meeting has a

service contract with the Group which is not determinable within one year without payment of compensation other than statutory

compensation.

Directors’ Material Interests in Transactions, Arrangements and ContractsNo transactions, arrangements and contracts of significance in relation to the Group’s business to which the Company or its subsidiaries

was a party and in which a Director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the

year or at any time during the year save as disclosed under the Connected Transactions and Continuing Connected Transactions section

stated above and Note 35 “Related Party Transactions” to the financial statements.

Directors’ InterestsAs at 31 December 2015, the Directors and chief executives of the Company and their associates had the following interests in the

Shares, underlying shares and debentures of the Company and its associated corporations (as defined under Part XV of the SFO)

as recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and the Stock

Exchange pursuant to the Model Code:

(A) Long Positions in Shares, Underlying Shares and Debentures of the Company

Number of Shares

Name of Director

Personal

Interest

Family

Interest

Trust/

Corporate

Interest

Equity

Derivatives

(Share Options) Total

Percentage

of Issued

Share Capital

Victor Fung Kwok King 2,814,444 – 2,551,966,1801 – 2,554,780,624 30.35%

William Fung Kwok Lun 177,120,260 108,8002(a) 2,425,362,4722(b) 7,509,0007 2,610,100,532 31.01%

Spencer Theodore Fung* 1,498,000 – 2,552,686,1801&3 12,569,0007 2,566,753,180 30.50%

Marc Robert Compagnon 976,800 126,0004(a) 12,902,9804(b) 11,945,0007 25,950,780 0.30%

Paul Edward Selway-Swift 36,000 – 16,0005 – 52,000 0.00%

Martin Tang Yue Nien 60,000 – 60,0006 – 120,000 0.00%

* Son of Victor Fung Kwok King



The following simplified chart illustrates the deemed interests of Victor Fung Kwok King and Spencer Theodore Fung under Note (1)

below and the interest of William Fung Kwok Lun under Note (2) below:

William Fung Kwok Lun(Note 2)

HSBC Trustee (C.I.) Limited(Note 1)

King Lun Holdings Limited

Fung Holdings (1937) Limited(Note 1(b))

Li & Fung Limited(33.42%)

50% 50%

27.91%

100%

3.10% 2.41%

NOTES:As at 31 December 2015,

(1) Victor Fung Kwok King and Spencer Theodore Fung were each deemed to have interests in 2,551,966,180 Shares held in the following manner:

(a) 203,012,308 Shares were indirectly held by HSBC Trustee (C.I.) Limited (“HSBC Trustee”) through its wholly-owned subsidiary, First Island Developments Limited. HSBC Trustee is

the trustee of a trust established for the benefit of the family members of Victor Fung Kwok King (the “Trust”); and

(b) 2,195,727,908 Shares were directly held by Fung Holdings (1937) Limited (“FH (1937)”), a wholly-owned subsidiary of King Lun Holdings Limited (“King Lun”), and 153,225,964

Shares were indirectly held by FH (1937) through its wholly-owned subsidiary, Fung Distribution International Limited (“Fung Distribution”). King Lun is a company owned 50%

by HSBC Trustee as trustee of the Trust and 50% by William Fung Kwok Lun.

(2) (a) Apart from 108,800 Shares, the spouse of William Fung Kwok Lun held US$2,000,000 of the perpetual subordinated capital securities of the Company.

(b) Out of 2,425,362,472 Shares, 26,114,400 Shares and 50,294,200 Shares were held by Golden Step Limited and Step Dragon Enterprise Limited respectively and both companies

are beneficially owned by William Fung Kwok Lun. The balance of 2,348,953,872 Shares were indirectly held by King Lun as mentioned in Note (1)(b) above.

(3) Out of 2,552,686,180 Shares, 720,000 Shares represented the interests in Award Shares granted by the Company and remained unvested. Details on such Award Shares are set

out in the Share Award Scheme section stated above. The balance of 2,551,966,180 Shares represented the deemed interests of Spencer Theodore Fung as mentioned in

Note (1) above.

(4) (a) 126,000 Shares represented the interests in Award Shares granted by the Company to the spouse of Marc Robert Compagnon of which 14,000 Award Shares were vested on

31 December 2015 and the balance of 112,000 Award Shares were forfeited on 1 January 2016.

(b) Out of 12,902,980 Shares, 613,200 Shares represented the interests in Award Shares granted by the Company and remained unvested. Details on such Award Shares are set

out in Share Award Scheme section stated above. The balance of 12,289,780 Shares were held by Profit Snow Holdings Limited, a company beneficially owned by Marc Robert

Compagnon.

(5) 16,000 Shares were held by a trust of which Paul Edward Selway-Swift is a beneficiary.

(6) 60,000 Shares were held by a trust of which Martin Tang Yue Nien is a beneficiary.

(7) These interests represented the interests in underlying shares in respect of Share Options granted by the Company to these Directors as beneficial owners, the details of which

are set out in the Share Option Schemes section stated above.



(B) Short Positions in Shares, Underlying Shares and Debentures of the Company

As at 31 December 2015, none of the Directors and chief executives of the Company or their associates had any short positions in the

Shares, underlying shares and debentures of the Company or any of its associated corporations (as defined under Part XV of the SFO),

as recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and the Stock

Exchange pursuant to the Model Code.

(C) Share Options and Award Shares

The interests of the Directors and chief executives in the Share Options (being regarded as unlisted physically settled equity derivatives)

and Award Shares are detailed in the Long-term Incentive Schemes section stated above.

Save as disclosed above, at no time during the year did the Directors and chief executives (including their spouses and children under

18 years of age) have any interest in, or were granted, or exercised, any rights to subscribe for Shares (or warrants or debentures,

if applicable) in the Company or its associated corporations, as required to be disclosed pursuant to the SFO.

Substantial Shareholders’ InterestsAs at 31 December 2015, other than the interests of the Directors or chief executives of the Company as disclosed in the previous

section, the following entities had interests in the Shares of the Company which are required to be disclosed to the Company under

Section 336 of the SFO:

Name of Shareholder Capacity Number of Shares

Percentage

of Issued

Share Capital

Long Positions

King Lun Holdings Limited Interest of controlled corporation 2,348,953,8721 27.91%

HSBC Trustee (C.I.) Limited Trustee 2,551,966,1802 30.32%

The Capital Group Companies, Inc. Interest of controlled corporation 673,623,000 8.00%

Commonwealth Bank of Australia Interest of controlled corporation 1,015,463,529 12.06%

NOTES:As at 31 December 2015,

(1) 2,195,727,908 Shares were directly held by FH (1937) which also through its wholly-owned subsidiary, Fung Distribution, indirectly held 153,225,964 Shares. FH (1937) is

a wholly-owned subsidiary of King Lun. Both Victor Fung Kwok King and William Fung Kwok Lun are directors of King Lun, FH (1937) and Fung Distribution.

(2) Please refer to Note (1) under the Directors’ Interests section stated above.

Save as disclosed above, the Company had not been notified of any short positions being held by any substantial shareholder in the

Shares or underlying shares of the Company as at 31 December 2015.

Public FloatBased on the information that is publicly available to the Company and within the knowledge of the Directors of the Company, as at the

date of this Report, there is sufficient public float of more than 25% of the Company’s issued Shares as required under the Listing Rules.

Senior ManagementThe biographical details of the senior management as at the date of this Report are set out in Our board and management team section

on pages 60 to 69.



Management ContractsNo contracts concerning the management and administration of the whole or any substantial part of the business of the Company were

entered into or existed during the year.

Corporate GovernancePrincipal corporate governance practices as adopted by the Company are set out in Our commitment to good governance section on

pages 32 to 49.

Directors’ Responsibilities for the Financial StatementsThe Directors are responsible for the preparation of financial statements for each financial period which give a true and fair view of

the state of affairs of the Group and of the results and cash flows for that period. In preparing these financial statements for the year

ended 31 December 2015, the Directors have selected suitable accounting policies and applied them consistently; made judgments

and estimates that are prudent and reasonable; and have prepared the financial statements on the going concern basis. The Directors

are responsible for keeping proper accounting records which disclose, with reasonable accuracy at any time, the financial position of

the Group.

AuditorThe financial statements have been audited by PricewaterhouseCoopers who retire and, being eligible, offer themselves

for reappointment.

On behalf of the Board

William FUNG Kwok Lun

Group Chairman

Hong Kong, 17 March 2016


Independent auditor’s report

PricewaterhouseCoppers, 22/F Prince’s Building, Central, Hong Kong

T: +852 2289 8888, F: +852 2810 9888, www.pwchk.com

TO THE SHAREHOLDERS OF LI & FUNG LIMITED

(incorporated in Bermuda with limited liability)

We have audited the consolidated financial statements of Li & Fung Limited (the “Company”) and its subsidiaries set out on pages 127

to 223, which comprise the consolidated balance sheet as at 31 December 2015, and the consolidated profit and loss account, the

consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow

statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Directors’ Responsibility for the Consolidated Financial StatementsThe directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in

accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the

disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary

to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely

to you, as a body, in accordance with Section 90 of the Companies Act 1981 of Bermuda and for no other purpose. We do not assume

responsibility towards or accept liability to any other person for the contents of this Report.

We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public

Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable

assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial

statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement

of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal

control relevant to the entity’s preparation of consolidated financial statements that give a true and fair view in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of

accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.


Independent auditor’s report (continued)

OpinionIn our opinion, the consolidated financial statements give a true and fair view of the financial position of the Company and its

subsidiaries as at 31 December 2015, and of their financial performance and cash flows for the year then ended in accordance

with Hong Kong Financial Reporting Standards and have been properly prepared in compliance with the disclosure requirements

of the Hong Kong Companies Ordinance.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 17 March 2016

Financial statements

127 Consolidated profit and loss account

129 Consolidated statement of comprehensive income

130 Consolidated balance sheet

132 Consolidated statement of changes in equity

134 Consolidated cash flow statement

178 24 Share capital, options and Award Shares

182 25 Reserves

184 26 Perpetual capital securities

184 27 Long-term liabilities

186 28 Post-employment benefit obligations

190 29 Deferred taxation

193 30 Notes to the consolidated cash flow statement

195 31 Discontinued Operations

197 32 Contingent liabilities

197 33 Commitments from Continuing Operations

197 34 Charges on assets

198 35 Related party transactions

199 36 Financial risk management

202 37 Capital risk management

203 38 Fair value estimation

206 39 Balance sheet and reserve movement of the Company

208 40 Benefits and interests of Directors (disclosures required by section 383 of the Hong Kong Companies Ordinance (Cap. 622), Companies (disclosure of information about benefits of Directors) Regulation (Cap. 622G) and HK Listing Rules)

211 41 Approval of financial statements

212 42 Principal subsidiaries, associated companies and joint venture

Notes to the financial statements

137 1 Basis of preparation and principal accounting policies

155 2 Critical accounting estimates and judgments

157 3 Segment information

161 4 Operating profit from Continuing Operations

162 5 Interest expenses from Continuing Operations

162 6 Taxation from Continuing Operations

163 7 Earnings/(losses) per Share

164 8 Dividends and distribution in specie

164 9 Staff costs including Directors’ emoluments for Continuing Operations

165 10 Directors’ and senior management’s emoluments

166 11 Intangible assets

169 12 Property, plant and equipment

171 13 Prepaid premium for land leases

171 14 Associated companies

172 15 Joint venture

172 16 Available-for-sale financial assets

172 17 Inventories

173 18 Due from/(to) related companies

173 19 Derivative financial instruments

174 20 Trade and other receivables

176 21 Cash and cash equivalents

176 22 Trade and other payables

177 23 Bank borrowings

Consolidated profit and loss accountFor the year ended 31 December 2015


2015 2014Note US$’000 US$’000

Continuing Operations

Turnover 3 18,830,835 19,288,499

Cost of sales (16,671,655) (17,106,990)

Gross profit 2,159,180 2,181,509

Other income 29,645 62,724

Total margin 2,188,825 2,244,233

Selling and distribution expenses (633,653) (617,178)

Merchandising and administrative expenses (1,042,748) (1,022,912)

Core operating profit 3 512,424 604,143

Gain on remeasurement of contingent consideration payable 4 116,973 176,007

Amortization of other intangible assets 4 (34,412) (35,462)

One-off reorganization costs – (19,763)

Other non-core operating expenses 4 – (1,300)

Operating profit 4 594,985 723,625

Interest income 9,761 6,984

Interest expenses 5

Non-cash interest expenses (6,662) (9,976)

Cash interest expenses (92,879) (95,203)

(99,541) (105,179)

Share of profits less losses of associated companies 14 1,570 1,373

Profit before taxation 506,775 626,803

Taxation 6 (57,890) (59,035)

Profit for the year from Continuing Operations 448,885 567,768

Discontinued Operations

Loss for the period from Discontinued Operations 31 – (98,122)

Net profit for the year 448,885 469,646

Attributable to:

Shareholders of the Company 421,046 441,276

Holders of perpetual capital securities 30,000 30,000

Non-controlling interests (2,161) (1,630)

448,885 469,646


Consolidated profit and loss account (continued)

For the year ended 31 December 2015

2015 2014Note US$’000 US$’000

Attributable to Shareholders of the Company arising from:

Continuing Operations 421,046 539,398

Discontinued Operations – (98,122)

421,046 441,276

Earnings/(losses) per share for profit/(loss) attributable to the Shareholders

of the Company during the year 7

Basic 39.1 HK cents 41.1 HK cents

(equivalent to) 5.04 US cents 5.29 US cents

– from Continuing Operations 39.1 HK cents 50.3 HK cents


– from Discontinued Operations – (9.2) HK cents

(equivalent to) – (1.17) US cents

Diluted 39.0 HK cents 41.1 HK cents


– from Continuing Operations 39.0 HK cents 50.3 HK cents


– from Discontinued Operations – (9.2) HK cents

(equivalent to) – (1.17) US cents

The notes on pages 137 to 223 are an integral part of these consolidated financial statements.

Consolidated statement of comprehensive incomeFor the year ended 31 December 2015


2015 2014US$’000 US$’000

Net Profit for the Year 448,885 469,646

Other Comprehensive (Expense)/Income:

Items that will not be reclassified to profit or loss

Remeasurements from post-employment benefits recognized in reserve, net of tax (63) (728)

Total Items that will not be Reclassified to Profit or Loss (63) (728)

Items that may be reclassified subsequently to profit or loss

Currency translation differences* (83,932) (92,158)

Net fair value (losses)/gains on cash flow hedges, net of tax (6,077) 10,302

Net fair value gains on available-for-sale financial assets, net of tax 126 40

Total Items that may be Reclassified Subsequently to Profit or Loss (89,883) (81,816)

Total Other Comprehensive Expense for the Year, Net of Tax (89,946) (82,544)

Total Comprehensive Income for the Year 358,939 387,102

Attributable to:

Shareholders of the Company 332,415 358,556


Non-controlling interests (3,476) (1,454)

Total Comprehensive Income for the Year 358,939 387,102

Attributable to Shareholders of the Company Arising From:


Discontinued Operations – (99,222)

332,415 358,556

* Exchange differences resulting from translation of the results and financial positions of the Group entities with functional currencies other than the Group’s presentation currency.


Consolidated balance sheetAs at 31 December 2015


As at 31 December2015 2014

Note US$’000 US$’000

Non-current Assets

Intangible assets 11 4,266,863 4,349,083

Property, plant and equipment 12 241,626 244,907

Prepaid premium for land leases 13 1,942 2,498

Associated companies 14 10,070 11,890

Joint venture 15 313 –

Available-for-sale financial assets 16 3,854 3,709

Other receivables, prepayments and deposits 20 26,217 7,570

Deferred tax assets 29 36,527 32,493

4,587,412 4,652,150

Current Assets

Inventories 17 566,002 565,291

Due from related companies 18 486,939 511,965

Trade and bills receivable 20 1,689,413 1,864,021

Other receivables, prepayments and deposits 20 256,818 333,743

Derivative financial instruments 19 4,272 11,323

Cash and bank balances 21 342,243 538,529

3,345,687 3,824,872

Current Liabilities

Due to related companies 18 1,038 48

Trade and bills payable 22 2,464,785 2,561,172

Accrued charges and sundry payables 22 601,129 692,427

Purchase consideration payable for acquisitions 27 86,266 134,468

Taxation 56,463 116,719

Bank advances for discounted bills 20 33,681 33,834

Short-term bank loans 23 95,819 162,850

3,339,181 3,701,518

Net Current Assets 6,506 123,354

Total Assets Less Current Liabilities 4,593,918 4,775,504


Consolidated balance sheet (continued)

As at 31 December 2015




Financed by:

Share capital 24 13,487 13,398

Reserves 2,489,386 2,585,086

Shareholders’ funds attributable to the Company’s Shareholders 2,502,873 2,598,484

Holders of perpetual capital securities 26 503,000 503,000

Non-controlling interests 4,293 8,594

Total Equity 3,010,166 3,110,078

Non-current Liabilities

Long-term notes 27 1,253,823 1,254,369

Purchase consideration payable for acquisitions 27 156,236 323,612

Other long-term liabilities 27 116,420 25,375

Post-employment benefit obligations 28 21,909 22,299

Deferred tax liabilities 29 35,364 39,771

1,583,752 1,665,426

4,593,918 4,775,504

William Fung Kwok Lun Spencer Theodore Fung

Group Chairman Group Chief Executive Officer

Consolidated statement of changes in equityFor the year ended 31 December 2015


Attributable to Shareholders of the CompanyHolders of Perpetual

Capital Securities

Non-controlling

InterestsTotal

Equity

Share Capital

Share Premium

Other Reserves

Retained Earnings Total

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000(Note 24) (Note 25) (Note 26)

Balance at 1 January 2015 13,398 699,476 634,098 1,251,512 2,598,484 503,000 8,594 3,110,078

Comprehensive Income/(Expense)

Profit or loss – – – 421,046 421,046 30,000 (2,161) 448,885

Other Comprehensive (Expense)/Income

Currency translation differences – – (82,617) – (82,617) – (1,315) (83,932)

Net fair value gains on available-for-sale financial assets, net of tax – – 126 – 126 – – 126

Net fair value losses on cash flow hedges, net of tax – – (6,077) – (6,077) – – (6,077)

Remeasurements from post-employment benefits recognized in reserve, net of tax – – (63) – (63) – – (63)

Total other comprehensive expense, net of tax – – (88,631) – (88,631) – (1,315) (89,946)

Total Comprehensive (Expense)/ Income – – (88,631) 421,046 332,415 30,000 (3,476) 358,939

Transactions with Owners in their Capacity as Owners

Issue of shares for Share Award Scheme 89 – (89) – – – – –

Purchase of shares for Share Award Scheme – – (7,300) – (7,300) – – (7,300)

Employee Share Option and Share Award Scheme:

– value of employee services – – 23,583 – 23,583 – – 23,583

– vesting of shares for Share Award Scheme – 5,142 (5,142) – – – – –

Distribution to holders of perpetual capital securities – – – – – (30,000) – (30,000)

Transfer from capital reserve – – (1,616) 1,616 – – – –

2014 final and special dividend paid – – – (303,388) (303,388) – (825) (304,213)

2015 interim dividend paid – – – (140,921) (140,921) – – (140,921)

Total Transactions with Owners in their Capacity as Owners 89 5,142 9,436 (442,693) (428,026) (30,000) (825) (458,851)

Balance at 31 December 2015 13,487 704,618 554,903 1,229,865 2,502,873 503,000 4,293 3,010,166


Consolidated statement of changes in equity (continued)



Attributable to Shareholders of the CompanyHolders of Perpetual

Capital Securities

Non-controlling

InterestsTotal

Equity

Share Capital

Share Premium

Other Reserves


US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000(Note 24) (Note 25) (Note 26)

Balance at 1 January 2014 13,398 3,699,476 6,503 1,317,260 5,036,637 503,000 10,048 5,549,685

Comprehensive Income/(Expense)

Profit or loss – – – 441,276 441,276 30,000 (1,630) 469,646

Other Comprehensive (Expense)/Income

Currency translation differences – – (92,334) – (92,334) – 176 (92,158)

Net fair value gains on available-for-sale financial assets, net of tax – – 40 – 40 – – 40

Net fair value gains on cash flow hedges, net of tax – – 10,302 – 10,302 – – 10,302

Remeasurements from post-employment benefits recognized in reserve, net of tax – – (728) – (728) – – (728)

Total other comprehensive (expense)/income, net of tax – – (82,720) – (82,720) – 176 (82,544)

Total Comprehensive (Expense)/ Income – – (82,720) 441,276 358,556 30,000 (1,454) 387,102

Transactions with Owners in their Capacity as Owners

Employee Share Option Scheme:

– value of employee services – – 228 – 228 – – 228

Distribution to holders of perpetual capital securities – – – – – (30,000) – (30,000)

Share premium reduction – (3,000,000) 3,000,000 – – – – –

Transfer to capital reserve – – 87 (87) – – – –

2013 final dividend paid – – – (366,779) (366,779) – – (366,779)

2014 interim dividend paid – – – (140,158) (140,158) – – (140,158)

Distribution in specie – – (2,290,000) – (2,290,000) – – (2,290,000)

Total Transactions with Owners in their Capacity as Owners – (3,000,000) 710,315 (507,024) (2,796,709) (30,000) – (2,826,709)

Balance at 31 December 2014 13,398 699,476 634,098 1,251,512 2,598,484 503,000 8,594 3,110,078

Consolidated cash flow statementFor the year ended 31 December 2015


2015 2014Note US$’000 US$’000


Operating Activities

Net cash inflow generated from operations 30(a) 608,764 692,565

Hong Kong profits tax paid (19,040) (12,584)

Overseas taxation paid (45,796) (42,042)

Net Cash Inflow from Operating Activities 543,928 637,939

Investing Activities

Purchases of property, plant and equipment 12 (78,090) (75,299)

Payments for system development, software, license and other

intangible assets (5,299) (11,124)

Settlement of consideration payable for prior years acquisitions of

businesses (102,268) (189,930)

Acquisitions of businesses – (34,285)

Payment on behalf of a related company – (57,134)

Proceeds from disposal of property, plant and equipment 4,560 2,678

Proceeds from disposal of an associated company 1,379 –

Interest income 9,761 6,984

Dividends received from associated companies 14 1,436 595

Investing in a joint venture 15 (313) –

Net Cash Outflow from Investing Activities (168,834) (357,515)

Net Cash Inflow before Financing Activities 375,094 280,424

Financing Activities

Interest paid (92,879) (95,203)

Distributions made to holders of perpetual capital securities (30,000) (30,000)

Dividends paid (445,134) (506,937)

Purchase of shares for Share Award Scheme (7,300) –

Net drawdown/(repayment) of bank loans 30(b) 15,969 (28,594)

Net Cash Outflow from Financing Activities (559,344) (660,734)

Decrease in Cash and Cash Equivalents from Continuing

Operations* (184,250) (380,310)


Increase in cash and cash equivalents from Discontinued Operations* – 668,374

(Decrease)/Increase in Cash and Cash Equivalents (184,250) 288,064

* Change in cash and cash equivalents before financing activities between Continuing Operations and Discontinued Operations.


Consolidated cash flow statement (continued)


2015 2014Note US$’000 US$’000

Cash and Cash Equivalents at 1 January


Discontinued Operations – 115,088

538,529 459,559

(Decrease)/Increase in Cash and Cash Equivalents (184,250) 288,064

Effect of foreign exchange rate changes (12,036) (4,493)

Distribution in specie 30(c) – (204,601)

Cash and Cash Equivalents of Continuing Operations

at 31 December 342,243 538,529

Analysis of the balances of cash and cash equivalents

Cash and bank balances 21 342,243 538,529


Consolidated cash flow statement (continued)


Movement of Cash and Cash Equivalents*

2015 2014US$’000 US$’000

Cash and Cash Equivalents at 1 January


Discontinued Operations – 115,088

538,529 459,559


Decrease in Cash and cash equivalents (184,250) (380,310)

Loan repayment from Discontinued Operations – 593,821

Capital injection to Discontinued Operations – (15,000)

(Decrease)/Increase in Cash and Cash Equivalents from Continuing Operations (184,250) 198,511


Increase in cash and cash equivalents – 668,374

Loan repayment to Continuing Operations – (593,821)

Capital injection from Continuing Operations – 15,000

Increase in Cash and Cash Equivalents from Discontinued Operations – 89,553

Effect of foreign exchange rate changes (12,036) (4,493)

Distribution in specie – (204,601)

Cash and Cash Equivalents of Continuing Operations at 31 December 342,243 538,529

* Additional information to illustrate the cash flow effect including financing activities between the Continuing Operations and the Discontinued Operations.


Notes to the financial statements


1 Basis of Preparation and Principal Accounting PoliciesThe basis of preparation and principal accounting policies applied in the preparation of these consolidated financial statements are

set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

On 8 July 2014, the Group spun-off its licensed brands and controlled brands businesses, named as the Global Brands Group,

via a distribution in specie. The financial results of the Global Brands Group for the period ended 8 July 2014 were presented as

Discontinued Operations.

1.1 Basis of PreparationThe consolidated financial statements of Li & Fung Limited have been prepared in accordance with all applicable Hong Kong

Financial Reporting Standards (“HKFRSs”). They have been prepared under the historical cost convention, as modified by the

revaluation of available-for-sale financial assets at fair value through other comprehensive income, financial assets and financial

liabilities (including derivative instruments and contingent consideration payable) at fair value through profit or loss.

The preparation of financial statements in conformity with HKFRSs requires the use of certain critical accounting estimates. It also

requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a

higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial

statements, are disclosed in Note 2.

(A) AMENDMENTS TO EXISTING STANDARDS ADOPTED BY THE GROUP

The following amendments to existing standards are mandatory for accounting periods beginning on or after 1 January 2015:

HKAS 19 (2011) Amendment Defined Benefit Plans: Employee Contributions

Annual Improvements Project Annual Improvements 2010-2012 Cycle

Annual Improvements Project Annual Improvements 2011-2013 Cycle

The application of the above amendments to existing standards in the current year has had no material effect on the Group’s

reported financial performance and position for the current and prior years and/or disclosures set out in these consolidated



Notes to the financial statements (continued)

1 Basis of Preparation and Principal Accounting Policies (continued)

1.1 Basis of Preparation (continued)

(B) NEW STANDARDS AND AMENDMENTS TO EXISTING STANDARDS THAT HAVE BEEN ISSUED BUT ARE NOT YET

EFFECTIVE AND HAVE NOT BEEN EARLY ADOPTED BY THE GROUP

The following new standards and amendments to existing standards have been issued and are mandatory for the Group’s

accounting periods beginning on or after 1 January 2016 or later periods, but the Group has not early adopted them:

HKAS 1 Amendment Disclosure Initiative1

HKAS 16 and HKAS 38 Amendment Clarification of Acceptable Methods of Depreciation and Amortisation1

HKAS 16 and HKAS 41 Amendment Agriculture: Bearer Plants1

HKAS 27 Amendment Equity Method in Separate Financial Statements1

HKFRS 9 Financial Instruments2

HKFRS 10 and HKAS 28 Amendment Sale or Contribution of Assets between an Investor and its Associate or

Joint Venture3

HKFRS 10, HKFRS 12 and HKAS 28 Amendment Investment Entities: Applying the Consolidation Exception1

HKFRS 11 Amendment Accounting for Acquisitions of Interests in Joint Operations1

HKFRS 14 Regulatory Deferral Accounts1

HKFRS 15 Revenue from Contracts with Customers2

Annual Improvements Project Annual Improvements 2012-2014 Cycle1

NOTES:1. Effective for annual periods beginning on or after 1 January 2016

2. Effective for annual periods beginning on or after 1 January 2018

3. Effective date to be determined

The Group is in the process of making an assessment of the impact of these new standards and amendments to existing standards

upon initial application.

(C) NEW HONG KONG COMPANIES ORDINANCE (CAP. 622)

The requirements of Part 9 “Accounts and Audit” of the new Hong Kong Companies Ordinance (Cap. 622) come into operation

during the financial year, as a result, there are changes to presentation and disclosures of certain information in the consolidated


1.2 ConsolidationThe consolidated financial statements include the financial statements of the Company and all its subsidiaries made up to 31

December 2015.

(A) SUBSIDIARIES

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the

Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns

through its power over the entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the

date that control ceases.




1.2 Consolidation (continued)

(A) SUBSIDIARIES (continued)

The Group uses the acquisition method of accounting to account for business combinations. The consideration for the acquisition

of a subsidiary is the aggregate of the fair values of the assets transferred, the liabilities incurred and the equity interests issued by

the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration

arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent

liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-

by-acquisition basis, the Group recognizes any non-controlling interest in the acquiree either at fair value or at the non-controlling

interest’s proportionate share of the acquiree’s net assets.

Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date. Subsequent changes

to the fair value of the contingent consideration that is deemed to be an asset or liability is recognized in accordance with HKAS 39

either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not

remeasured, and its subsequent settlement is accounted for within equity.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date

fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as

goodwill (Note 1.6). If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase,

the difference is recognized directly in the statement of comprehensive income.

Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized

losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies

and financial information of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by

the Group.

Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising

from contingent consideration amendments. Cost also includes direct attributable costs of investment.

In the Company’s balance sheet the investments in subsidiaries are stated at cost less provision for impairment losses (Note 1.7).

The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable.

(B) TRANSACTIONS WITH NON-CONTROLLING INTERESTS

The Group treats transactions with non-controlling interests that do not result in loss of control as transactions with equity owners

of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share

acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling

interests are also recorded in equity.




1.2 Consolidation (continued)

(C) ASSOCIATED COMPANIES

Associated companies are all entities over which the Group has significant influence but not control, generally accompanying a

shareholding of between 20% and 50% of the voting rights. Investments in associated companies are accounted for using the equity

method of accounting and are initially recognized at cost, and the carrying amount is increased or decreased to recognize the

investor’s share of the profit or loss of the investee after the date of acquisition. The Group’s investment in associated companies

includes goodwill (net of any accumulated impairment loss) identified on acquisition (Note 1.6).

The Group’s share of its associated companies’ post-acquisition profits or losses is recognized in the consolidated profit and loss

account, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive

income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured

receivables, the Group does not recognize further losses, unless it has incurred legal or constructive obligations or made payments

on behalf of the associate.

The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is

impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of

the associate and its carrying value and recognizes the amount adjacent to “share of profits less losses of associated companies”

in the consolidated profit and loss account.

Unrealized gains on transactions between the Group and its associated companies are eliminated to the extent of the Group’s

interests in the associated companies. Unrealized losses are also eliminated unless the transaction provides evidence of an

impairment of the asset transferred. The financial information of associated companies has been changed where necessary to

ensure consistency with the policies adopted by the Group.

Dilution gains and losses in associates are recognized in the consolidated profit and loss account.

(D) JOINT VENTURES

Under the equity method of accounting, interests in joint venture are initially recognized at cost and adjusted thereafter to

recognize the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income. When the

Group’s share of losses in a joint venture equals or exceeds its interests in the joint venture (which includes any long-term interests

that, in substance, form part of the Group’s net investment in the joint venture), the Group does not recognize further losses, unless

it has incurred obligations or made payments on behalf of the joint venture.

Unrealized gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in

the joint ventures. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset

transferred.




1.3 Segment ReportingOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-

maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the

operating segments, has been identified for making strategic decisions.

1.4 Foreign Currency Translation

(A) FUNCTIONAL AND PRESENTATION CURRENCY

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic

environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in

US dollar, which is the Company’s functional and presentation currency.

(B) TRANSACTIONS AND BALANCES

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the

transactions or revaluation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of

such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign

currencies are recognized in the consolidated profit and loss account, except when deferred in equity as qualifying cash flow

hedges or qualifying net investment hedges.

Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analyzed

between translation differences resulting from changes in the amortized cost of the security and other changes in the carrying

amount of the security. Translation differences related to changes in the amortized cost are recognized in profit or loss, and other

changes in the carrying amount are recognized in other comprehensive income.

Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are

recognized in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as

equities classified as available-for-sale are included in the available-for-sale reserve in other comprehensive income.

(C) GROUP COMPANIES

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that

have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

(ii) income and expenses for each profit and loss account are translated at average exchange rates (unless this average is not a

reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and

expenses are translated at the rate on the dates of the transactions); and

(iii) all resulting exchange differences are recognized in other comprehensive income.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings

and other currency instruments designated as hedges of such investments, are taken to other comprehensive income.




1.4 Foreign Currency Translation (continued)

(C) GROUP COMPANIES (continued)

On the disposal of a foreign operation (that is, a disposal of the group’s entire interest in a foreign operation, or a disposal involving

loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a jointly controlled

entity that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign

operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the equity holders of

the Company are reclassified to profit or loss.

In the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign operation,

the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognized

in profit or loss. For all other partial disposals (that is, reductions in the Group’s ownership interest in associates or jointly controlled

entities that do not result in the Group losing significant influence or joint control) the proportionate share of the accumulated

exchange difference is reclassified to profit or loss.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign

entity and translated at the closing rate. Exchange differences arising are recognized in equity.

1.5 Property, Plant and Equipment

(A) LAND AND BUILDINGS

Freehold land is stated at cost less impairment.

Buildings are stated at cost less accumulated depreciation and accumulated impairment losses.

(B) OTHER PROPERTY, PLANT AND EQUIPMENT

Other property, plant and equipment, comprising leasehold improvements, furniture, fixtures and equipment, plant and machinery,

motor vehicles and company boat, are stated at cost less accumulated depreciation and accumulated impairment losses.

(C) DEPRECIATION AND IMPAIRMENT

Freehold land is not depreciated. Other classes of property, plant and equipment are depreciated at rates sufficient to allocate

their costs less accumulated impairment losses to their residual values over their estimated useful lives on a straight-line basis.

The principal annual rates are as follows:

Leasehold land shorter of lease term or useful life

Buildings and leasehold improvements 2% – 20%

Furniture, fixtures and equipment 6 2/3% – 33 1/3%

Plant and machinery 10% – 15%

Motor vehicles and company boat 15% – 20%




1.5 Property, Plant and Equipment (continued)

(C) DEPRECIATION AND IMPAIRMENT (continued)

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s

carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated

recoverable amount (Note 1.7). Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset,

as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost

of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repair and maintenance

costs are expensed in the consolidated profit and loss account during the financial period in which they are incurred.

(D) GAIN OR LOSS ON DISPOSAL

The gain or loss on disposal of property, plant and equipment is the difference between the net sales proceeds and the carrying

amount of the relevant item, and is recognized in the consolidated profit and loss account.

1.6 Intangible Assets

(A) GOODWILL

Goodwill represents the excess of the considerations transferred over the net fair value of the Group’s share of the net identifiable

assets/liabilities and contingent liabilities of the acquired business/associated company/joint venture at the date of acquisition

(Note 1.2(a)). Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associated

companies and joint ventures is included in interests in associated accompanies and joint ventures and is tested annually for

impairment as part of the overall balance. Separately recognized goodwill is tested annually for impairment and carried at cost less

accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity

include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-

generating units or groups of cash-generating units that are expected to benefit from the business combination in which the

goodwill arose identified according to operating segment. Each unit or groups of units to which the goodwill is allocated represents

the lowest level within the entity at which the goodwill is monitored for internal management purpose.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential

impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair

value less costs to sell. Any impairment is recognized immediately as an expense and is not subsequently reversed.




1.6 Intangible Assets (continued)

(B) SYSTEM DEVELOPMENT, SOFTWARE AND OTHER LICENSE COSTS

Acquired computer software licences are capitalized on the basis of the costs incurred to acquire and bring to use the specific

software. These costs are amortized over the estimated useful lives of 3 to 10 years.

Costs associated with developing or maintaining computer software programmes are recognized as an expense as incurred. Costs

that are directly associated with the development of identifiable and unique software products controlled by the Group, and that

will probably generate economic benefits exceeding costs beyond one year, are recognized as intangible assets. Costs include the

employee costs incurred as a result of developing software and an appropriate portion of relevant overheads.

System development costs recognized as assets are amortized over their estimated useful lives of 3 to 10 years.

Brand licenses are license contracts entered into with the brandholders by the Group in the capacity as licensee. Brand licenses

are capitalized based on the upfront costs incurred and the present value of guaranteed royalty payments to be made subsequent

to the inception of the license contracts. Brand licenses are amortized based on expected usage from the date of first commercial

usage over the remaining licence periods ranging from approximately 1 to 10 years.

(C) OTHER INTANGIBLE ASSETS

Intangible assets, other than goodwill, identified on business combinations are capitalized at their fair values. They represent

mainly trademarks, buying agency agreements secured, and relationships with customers and licensors. Intangible assets arising

from business combinations with definite useful lives are amortized on a straight-line basis from the date of acquisition over their

estimated useful lives ranging from 5 to 20 years.

1.7 Impairment of Investments in Subsidiaries, Associated Companies, Joint Ventures and Non-financial AssetsAssets that have an indefinite useful life, for example goodwill, are not subject to amortization and are tested annually for

impairment. Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount

may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its

recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the

purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows

(cash-generating units). Non-financial assets other than goodwill that suffer an impairment are reviewed for possible reversal of the

impairment at each reporting date.

Impairment testing of the investments in subsidiaries, associated companies or joint venture is required upon receiving dividends

from these investments if the dividend exceeds the total comprehensive income of the subsidiaries, associated companies or

joint venture in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements

exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.




1.8 Discontinued OperationsA discontinued operation is a component of the group’s business, the operations and cash flows of which can be clearly

distinguished from the rest of the group and which represents a separate major line of business or geographic area of operations,

or is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, or is a

subsidiary acquired exclusively with a view to resale.

When an operation is classified as discontinued, a single amount is presented in the consolidated profit and loss account, which

comprises the post-tax profit or loss of the discontinued operation and the post-tax gain or loss recognized on the measurement

to fair value less costs to sell, or on the disposal, of the assets or disposal group constituting the discontinued operation.

1.9 Financial Assets

CLASSIFICATION

The Group classifies its financial assets as either loans and receivables or available-for-sale. The classification depends on the

purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial

recognition.

(A) Loans and Receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active

market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These

are classified as non-current assets. The Group’s loans and receivables comprise “trade and bills receivable”, “other receivables,

prepayments and deposits”, “cash and bank balances” and “amounts due from related companies” in the balance sheet (Note 1.12).

(B) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any other

category. They are included in non-current assets unless management intends to dispose of the investment within 12 months

of the balance sheet date.




1.9 Financial Assets (continued)

RECOGNITION AND MEASUREMENTRegular purchases and sales of financial assets are recognized on the trade-date – the date on which the Group commits to

purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all financial assets not carried

at fair value through profit or loss. Financial assets are derecognized when the rights to receive cash flows from the investments

have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-

sale financial assets are subsequently carried at fair value. Loans and receivables are subsequently carried at amortized cost using

the effective interest method.

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analyzed

between translation differences resulting from changes in amortized cost of the security and other changes in the carrying

amount of the security. The translation differences on monetary securities are recognized in consolidated profit or loss; translation

differences on non-monetary securities are recognized in other comprehensive income. Changes in the fair values of monetary and

non-monetary securities classified as available-for-sale are recognized in other comprehensive income.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognized in equity

are included in the consolidated profit and loss account as net investment loss.

Interest on available-for-sale securities calculated using the effective interest method is recognized in the consolidated profit and

loss account as part of interest income. Dividends on available-for-sale equity instruments are recognized in the consolidated profit

and loss account as part of other revenues when the Group’s right to receive payments is established.

1.10 Impairment of Financial Assets

(A) ASSETS CLASSIFIED AS LOANS AND RECEIVABLES CARRIED AT AMORTIZED COSTThe Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of

financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if

there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset

(a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of

financial assets that can be reliably estimated.

The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:

• Significant financial difficulty of the issuer or obligor;

• A breach of contract, such as a default or delinquency in interest or principal payments;

• The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession

that the lender would not otherwise consider;

• It becomes probable that the borrower will enter bankruptcy or other financial reorganization;

• The disappearance of an active market for that financial asset because of financial difficulties; or

• Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial

assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial

assets in the portfolio, including:

(i) adverse changes in the payment status of borrowers in the portfolio;

(ii) national or local economic conditions that correlate with defaults on the assets in the portfolio.




1.10 Impairment of Financial Assets (continued)

(A) ASSETS CLASSIFIED AS LOANS AND RECEIVABLES CARRIED AT AMORTIZED COST (continued)

The Group first assesses whether objective evidence of impairment exists.

The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated

future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective

interest rate. The asset’s carrying amount is reduced and the amount of the loss is recognized in the consolidated profit and loss

account. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest

rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s

fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event

occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the reversal of the previously

recognized impairment loss is recognized in the consolidated profit and loss account.

(B) ASSETS CLASSIFIED AS AVAILABLE-FOR-SALE

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of

financial assets is impaired. For debt securities, the Group uses the criteria referred to (A) above. In the case of equity investments

classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence

that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as

the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously

recognized in profit or loss – is removed from equity and recognized in the consolidated profit and loss account. Impairment losses

recognized in the consolidated profit and loss account on equity instruments are not reversed through the consolidated profit

and loss account. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the

increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment

loss is reversed through the separate consolidated profit and loss account.

1.11 InventoriesInventories comprise raw materials and finished goods and are stated at the lower of cost and net realizable value. Cost, calculated

on a first-in, first-out (FIFO) basis, comprises purchase prices of inventories and direct costs (based on normal operating capacity).

It excludes borrowing costs. Net realizable value is the estimated selling price in the ordinary course of business less applicable

variable selling expenses.




1.12 Trade and Other ReceivablesTrade and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective

interest method, less provision for impairment. If collection of trade and other receivables is expected in one year or less (or in the

normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current

assets. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group

will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the

debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments (more

than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference

between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective

interest rate. The carrying amount of the assets is reduced through the use of an allowance account, and the amount of the loss is

recognized in the consolidated profit and loss account within selling expenses. When a trade receivable is uncollectible, it is written

off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited

against selling expenses in the consolidated profit and loss account.

1.13 Share CapitalOrdinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the

proceeds.

1.14 Cash and Cash EquivalentsCash and cash equivalents include cash in hand, deposits held at call with banks and bank overdrafts. Bank overdrafts are shown

within borrowings in current liabilities on the balance sheet.

1.15 BorrowingsBorrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized

cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the consolidated

profit and loss account over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that

some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no

evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a prepayment for liquidity

services and amortized over the period of the facility to which it relates.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at

least 12 months after the balance sheet date.




1.16 Current and Deferred TaxThe tax expense for the period comprises current and deferred tax. Tax is recognized in the consolidated profit and loss account,

except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case the tax is

also recognized in other comprehensive income or directly in equity, respectively.

The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in

the countries where the Company’s subsidiaries and associates operate and generate taxable income. Management periodically

evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and

establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred tax is provided, using the liability method, on temporary differences arising between the tax bases of assets and liabilities

and their carrying amounts in the consolidated financial statements. However, the deferred tax is not accounted for if it arises

from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction

affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates (and laws) that have been enacted

or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realized or the

deferred tax liability is settled.

Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the

temporary differences can be utilized.

Deferred tax is provided on temporary differences arising on investments in subsidiaries, associates, except for deferred tax liability

where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary

difference will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax

liabilities and when the deferred taxes assets and liabilities relate to income taxes levied by the same taxation authority on either

the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

1.17 Employee Benefits

(A) EMPLOYEE LEAVE ENTITLEMENTS

Employee entitlements to annual leave are recognized when they accrue to employees. A provision is made for the estimated

liability for annual leave entitlements as a result of services rendered by employees up to the balance sheet date.

Employee entitlements to sick leave and maternity leave are not recognized until the time of leave.

(B) DISCRETIONARY BONUS

The expected costs of discretionary bonus payments are recognized as a liability when the Group has a present legal or

constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made.

Liabilities for discretionary bonus are expected to be settled within 12 months and are measured at the amounts expected to be

paid when they are settled.




1.17 Employee Benefits (continued)

(C) POST-EMPLOYMENT BENEFIT OBLIGATIONS

The Group participates in a number of defined contribution plans and defined benefit plans throughout the world, the assets of

which are generally held in separate trustee – administrated funds. The defined benefit pension plans are generally funded by

payments from employees and by the relevant Group companies, taking into account the recommendations of independent

qualified actuaries.

The Group’s contributions to the defined contribution plans are charged to the consolidated profit and loss account in the year to

which the contributions relate.

For defined benefit plans, pension costs are assessed using the projected unit credit method. Under this method, the cost of

providing pensions is charged to the consolidated profit and loss account so as to spread the regular cost over the service lives

of employees in accordance with the advice of the actuaries who carry out a full valuation of the plans on an annual basis. The

pension obligation is measured as the present value of the estimated future cash outflows, discounted by reference to market

yields on high-quality corporate bonds which have terms to maturity approximating the terms of the related liabilities. In countries

where there is no deep market in such bonds, the market yields on government bonds are used. Actuarial gains and losses arising

from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive

income in the period in which they arise. Past-service costs are recognized immediately in the consolidated profit and loss account.

The Group’s net obligation in respect of long-service payments on cessation of employment in certain circumstances under the

Hong Kong Employment Ordinance is the amount of future benefit that employees have earned in return for their service in the

current and prior periods; that benefit is discounted to determine the present value and reduced by entitlements accrued under the

Group’s retirement plans that are attributable to contributions made by the Group. The obligation is calculated using the projected

unit credit method by a qualified actuary. The discount rate is determined by reference to market yields on high-quality corporate

bonds which have terms to maturity approximating the terms of the related liabilities. In countries where there is no deep market in

such bonds, the market yields on government bonds are used.




1.17 Employee Benefits (continued)

(D) SHARE-BASED COMPENSATION

The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services received in

exchange for the grant of the options/share awards is recognized as an expense. The total amount to be expensed over the vesting

period is determined by reference to the fair value of the options/share awards granted:

• including any market performance conditions;

• excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sale growth

targets and remaining an employee of the entity over a specified time period); and

• including the impact of any non-vesting conditions (for example, the requirement for employees to save).

Non-market performance vesting conditions are included in assumptions about the number of options/share awards that are

expected to vest. The total expense is recognized over the vesting period, which is the period over which all of the specified vesting

conditions are to be satisfied. At each balance sheet date, the Group revises its estimates on the number of options/share awards

that are expected to vest. It recognizes the impact of the revision of original estimates, if any, in the consolidated profit and loss

account, with a corresponding adjustment to employee share-based compensation reserve.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share

premium when the options are exercised.

(E) SHARE-BASED PAYMENT TRANSACTIONS AMONG GROUP ENTITIES

The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is

treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value,

is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity

in the parent entity’s financial statements.

1.18 ProvisionsProvisions are recognized when: the Group has a present legal or constructive obligation as a result of past events; it is probable

that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not

recognized for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by

considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any

one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using

a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation.

The increase in the provision due to passage of time is recognized as interest expense.




1.19 Contingent Liabilities and Contingent AssetsA contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the

occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a

present obligation arising from past events that is not recognized because it is not probable that outflow of economic resources will

be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognized but is disclosed in the notes to the financial statements. When a change in the probability of

an outflow occurs so that outflow is probable, it will then be recognized as a provision.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence

or non-occurrence of one or more uncertain events not wholly within the control of the Group.

Contingent assets are not recognized but are disclosed in the notes to the financial statements when an inflow of economic

benefits is probable. When inflow is virtually certain, an asset is recognized.

1.20 Total MarginTotal margin includes gross profit and other recurring income relating to the trading and logistics businesses.

1.21 Core Operating ProfitCore operating profit is the profit before taxation generated from the Group’s trading and logistics businesses excluding share of

results of associated companies, interest income, interest expenses, tax, material gains or losses which are of capital nature or

non-operational related, acquisition related cost. This also excludes gain or loss on remeasurement of contingent consideration

payable and amortization of other intangible assets which are non-cash items.

1.22 Revenue RecognitionRevenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary

course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating

sales within the Group.

The Group recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits

will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The amount of

revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases

its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each

arrangement.

Revenue from the sale of goods is recognized on the transfer of risks and rewards of ownership, which generally coincides with the

time when the goods are delivered to customers and title has been passed.

A service income is recognized in the accounting period in which the services are rendered, by reference to completion of the

specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided.




1.22 Revenue Recognition (continued)

Interest income is recognized using the effective interest method. When a loan and receivable is impaired, the group reduces the

carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate

of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan and receivables are

recognized using the original effective interest rate.

Dividend income is recognized when the right to receive payment is established.

Other income incidental to normal operating activities is recognized when the services are rendered or the right to receive payment

is established.

1.23 Borrowing CostsBorrowing costs that are directly attributable to the acquisition, construction or production of qualifying asset that necessarily takes

a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of that asset, until such time as

the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is

deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are charged to the consolidated profit and loss account in the year in which they are incurred.

1.24 Operating LeasesLeases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating

leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated

profit and loss account on a straight-line basis over the period of the lease. The upfront prepayments made for leasehold land and

land use rights are amortized on a straight-line basis over the period of the lease or where there is impairment, the impairment is

expensed in the consolidated profit and loss account.

1.25 Derivative Financial Instruments and Hedging ActivitiesDerivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at

their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging

instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of a particular risk

associated with a recognized liability or a highly probable forecast transaction (cash flow hedge).

The Group documents, at the inception of the transaction, the intended relationship between hedging instruments and hedged

items, as well as its risk management objectives and strategy for undertaking various hedge transactions. The Group also

documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging

transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

Movements in the fair values of hedging derivatives are included within shareholders’ equity. The full fair value of a hedging

derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months.

Trading derivatives are classified as a current asset or liability.




1.25 Derivative Financial Instruments and Hedging Activities (continued)

(A) CASH FLOW HEDGE

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized

in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the consolidated

profit and loss account.

Amounts accumulated in equity are recycled to the consolidated profit and loss account in the periods when the hedged item

affects profit or loss (for example, when the forecast sale that is hedged takes place). The gain or loss relating to the effective

portion of forward foreign exchange contracts hedging export sales is recognized in the consolidated profit and loss account within

sales. The gain or loss relating to the ineffective portion is recognized in the consolidated profit and loss account within other

gains/(losses) – net. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for

example, inventory or property, plant and equipment), the gains and losses previously deferred in equity are transferred from equity

and included in the initial measurement of the cost of the asset. The deferred amounts are ultimately recognized in cost of goods

sold in case of inventory, or in depreciation in case of property, plant and equipment.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative

gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized

in the consolidated profit and loss account. When a forecast transaction is no longer expected to occur, the cumulative gain or loss

that was reported in equity is immediately transferred to the consolidated profit and loss account.

(B) DERIVATIVES AT FAIR VALUE THROUGH PROFIT OR LOSS

Derivatives financial instruments recognized at fair value through profit or loss include certain derivative instruments that do not

qualify for hedge accounting and conversion right embedded in convertible promissory note (Note 19). Both are initially recognized

at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Changes in the

fair values of derivative financial instruments are recognized immediately in the consolidated profit and loss account.

1.26 Trade PayablesTrade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from

suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating

cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest

method.

1.27 Dividend DistributionDividend distribution to the Company’s shareholders is recognized as a liability in the Group’s and Company’s financial statements

in the period in which the dividends are approved by the Company’s shareholders.

1.28 Treasury SharesIn relation to certain business combinations and Share Award Scheme, the Company may issue or purchase shares to escrow

agents for the settlement of acquisition consideration payables and to the trustee of Share Award Scheme. The shares, valued at

the agreed upon issue price or purchase price, including any directly attributable incremental costs, are presented as “treasury

shares” and deducted from total equity. The number of shares held by escrow agent for settlement of acquisition consideration

and by the trustee of Share Award Scheme would be eliminated against the corresponding amount of share capital issued in the

calculation of the earnings per share for profit attributable to the shareholders of the Company.




1.29 Financial Guarantee ContractFinancial guarantees are initially recognized in the financial statements at fair value on the date the guarantee was given. The

Company’s liabilities under such guarantees are subsequently measured at the higher of the initial amount, less amortization of

fees recognized in accordance with HKAS 18, and the best estimate of the amount required to settle the guarantee. These estimates

are determined based on the experience of similar transactions and history of past losses, supplemented by the judgment of

management. The fee income earned is recognized on a straight-line basis over the life of the guarantee. Any increase in the

liability relating to guarantees is reported in the consolidated profit and loss account within administrative expenses.

2 Critical Accounting Estimates and JudgmentsEstimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations

of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom

equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the

carrying amounts of assets and liabilities within the next financial year are discussed below.

(A) Estimated Impairment of Intangible Assets including GoodwillThe Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in

Note 1.6. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These

calculations require the use of estimates (Note 11).

(B) Useful Lives of Intangible AssetsThe Group amortizes its intangible assets with finite useful lives on a straight-line basis over their estimated useful lives. The

estimated useful lives reflect the management’s estimates of the periods that the Group intends to derive future economic benefits

from the use of these intangible assets.

(C) Income TaxesThe Group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the worldwide

provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain

during the ordinary course of business. The Group recognizes liabilities for anticipated tax audit issues based on estimates

of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were

initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination

is made.



2 Critical Accounting Estimates and Judgments (continued)

(D) Contingent Considerations of AcquisitionsCertain of the Group’s business acquisitions have involved post-acquisition performance-based contingent considerations. HKFRS

3 (Revised) is effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first

annual reporting period beginning on or after 1 July 2009. The Group follows the requirement of HKFRS 3 (Revised) to recognize the

fair value of those contingent considerations for acquisitions, as of their respective acquisition dates as part of the consideration

transferred in exchange for the acquired businesses/subsidiaries. These fair value measurements require, among other things,

significant estimation of post-acquisition performance of the acquired subsidiaries/business and significant judgment on time value

of money. Contingent considerations shall be remeasured at their fair value resulting from events or factors emerging after the

acquisition date, with any resulting gain or loss recognized in the consolidated profit and loss account in accordance with HKFRS 3

(Revised). For acquisitions completed prior to 1 January 2010, the effective date of HKFRS 3 (Revised) for the Group, changes in the

fair values of contingent consideration are recognized in goodwill.

The basis of the contingent consideration differs for each acquisition; generally however the contingent consideration reflects

a specified multiple of the post-acquisition financial profitability of the acquired business. Consequently, the actual additional

consideration payable may vary according to the future performance of each individual acquired business, and the liabilities

provided reflect estimates of such future performances.

Due to the number of acquisitions for which additional consideration remains outstanding and the variety of bases of determination,

it is not practicable to provide any meaningful sensitivity in relation to the critical assumptions concerning future profitability of

each acquired business and the potential impact on the gain or loss on remeasurement of contingent consideration payables and

goodwill for each acquired business.

However, if the total actual contingent consideration payables are 10% lower or higher than the total contingent consideration

payables estimated by management, the resulting aggregate impact to the gain or loss on remeasurement of contingent

consideration payables for acquisitions made after 2010 would be US$24 million.



3 Segment InformationThe Company is domiciled in Bermuda. The Company is a limited liability company incorporated in Bermuda. The address of its

registered office is Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda and its Hong Kong office is at 11/F, Li Fung Tower,

888 Cheung Sha Wan Road, Kowloon, Hong Kong. The Group is principally engaged in managing the supply chain for retailers and

brands worldwide with over 300 offices and distribution centers in more than 40 economies spanning across the Americas, Europe,

Africa and Asia. Turnover represents revenue generated from sales and services rendered at invoiced value to customers from the

Continuing Operations less discounts and returns.

In 2014, the Group accomplished a major restructuring of its operations. After the restructuring, the Group spun-off its licensed

brands and controlled brands businesses primarily under Distribution Network, named as the Global Brands Group, via a distribution

in specie on 8 July 2014. After the spin-off, the Group has grouped the remaining business under Distribution Network into Trading

Network and continued to operate under two business networks, namely the Trading Network and the Logistics Network. The

Trading Network focuses on provision of the global sourcing services via multiple channels, such as buying agent, trading-as-

principal for private label merchandise and on-shore wholesale business. The Logistics Network focuses on provision of logistics

solutions and freight forwarding services. The Group’s Management (Chief Operating Decision-Maker) considers the business

principally from the perspective of the two networks.

The Group’s management assesses the performance of the operating segments based on a measure of operating profit, referred to

as core operating profit (see Note 1.21). This measurement basis includes profit of the operating segments before share of results

of associated companies, interest income, interest expenses, tax, material gains or losses which are of capital nature or

non-operational related, acquisition related cost. This also excludes any gain or loss on remeasurement of contingent consideration

payable and amortization of other intangible assets which are non-cash items. Other information provided to the Group’s

management is measured in a manner consistent with that in the financial statements.



3 Segment Information (continued)

Trading Network

Logistics Network Elimination Total

US$’000 US$’000 US$’000 US$’000

Year ended 31 December 2015

Turnover 17,906,577 932,170 (7,912) 18,830,835

Total margin 1,909,007 279,818 2,188,825

Operating costs (1,449,132) (227,269) (1,676,401)

Core operating profit 459,875 52,549 512,424

Gain on remeasurement of contingent

consideration payable 116,973

Amortization of other intangible assets (34,412)

Operating profit 594,985

Interest income 9,761

Interest expenses

Non-cash interest expenses (6,662)

Cash interest expenses (92,879)

(99,541)

Share of profits less losses of associated companies 1,570

Profit before taxation 506,775

Taxation (57,890)

Net profit for the year 448,885

Depreciation and amortization 95,452 15,123 110,575

31 December 2015

Non-current assets (other than available-for-sale financial

assets and deferred tax assets) 3,890,628 656,403 4,547,031




Trading Network

Logistics Network Elimination Total

US$’000 US$’000 US$’000 US$’000


Turnover 18,430,816 873,577 (15,894) 19,288,499

Total margin 2,003,932 240,301 2,244,233

Operating costs (1,445,648) (194,442) (1,640,090)

Core operating profit 558,284 45,859 604,143

Gain on remeasurement of contingent

consideration payable 176,007


One-off reorganization costs (19,763)

Other non-core operating expenses (1,300)

Operating profit 723,625

Interest income 6,984

Interest expenses



(105,179)

Share of profits less losses of associated companies 1,373

Profit before taxation 626,803

Taxation (59,035)

Profit for the year from Continuing Operations 567,768

Loss for the period from Discontinued Operations (98,122)

Net profit for the year 469,646

Depreciation and amortization 100,922 14,198 115,120

31 December 2014

Non-current assets (other than available-for-sale financial

assets and deferred tax assets) 3,974,971 640,977 4,615,948




The geographical analysis of the Continuing Operations’ turnover and the Group’s non-current assets (other than available-for-sale

financial assets and deferred tax assets) is as follows:

Non-current Assets(Other Than Available-for-sale

Financial Assets and Deferred Tax Assets)

Turnover As at 31 December2015 2014 2015 2014

US$’000 US$’000 US$’000 US$’000

United States of America 11,653,992 11,587,145 2,024,579 1,981,767

Europe 3,108,613 3,488,136 1,161,115 1,264,408

Asia 2,736,321 2,744,264 1,127,532 1,116,474

Rest of the world 1,331,909 1,468,954 233,805 253,299

18,830,835 19,288,499 4,547,031 4,615,948

Turnover of the Continuing Operations consists of sales of soft goods, hard goods and logistics income is as follows:

2015 2014US$’000 US$’000

Soft goods 11,069,902 11,674,826

Hard goods 6,823,509 6,727,997

Logistics 937,424 885,676

18,830,835 19,288,499

For the year ended 31 December 2015, approximately 13% (2014: 14%) of the Continuing Operations’ total turnover is derived from

a single external customer, which is wholly attributable to the Trading Network.



4 Operating Profit from Continuing OperationsOperating profit from Continuing Operations is stated after crediting and charging the following:

2015 2014US$’000 US$’000

Crediting

Gain on remeasurement of contingent consideration payable (Note)* 116,973 176,007

Charging

Cost of inventories sold 16,671,655 17,106,990

Amortization of system development, software and other license costs (Note 11) 14,538 14,574

Amortization of other intangible assets (Note 11)* 34,412 35,462

Amortization of prepaid premium for land leases (Note 13) 119 137

Depreciation of property, plant and equipment (Note 12) 61,506 64,947

Loss on disposal of property, plant and equipment, net 1,679 1,363

Operating leases rental in respect of land and building 155,871 146,292

Provision for impaired receivables (Note 20) 21,582 31,083

Staff costs including directors’ emoluments (Note 9) 1,024,684 995,208

Business acquisition-related cost* – 1,300

Net exchange losses 5,082 4,611

* Excluded from the core operating profit

NOTE:During the year, the Group remeasured contingent consideration payable for all acquisitions with outstanding contingent consideration arrangements based on the market

outlook and their prevailing business plans and projections. Accordingly, a gain of approximately US$117 million was recognized. Among the total remeasurement gain,

approximately US$87 million was adjustments to earn-up consideration. The revised provision for performance-based contingent considerations are calculated based on

discounted cash flows of future consideration payment with the revision of estimated future profit of these acquired businesses. These gains were recognized as a non-core

operating gain on remeasurement of contingent consideration payable.

The remuneration to the auditors for audit and non-audit services is as follows:

2015 2014US$’000 US$’000

Audit services 4,491 4,605

Non-audit services

– due diligence reviews on acquisitions – 211

– taxation services 2,630 2,606

– others 1,534 110

Total remuneration to auditors charged to consolidated profit and loss account 8,655 7,532

NOTE:Of the above audit and non-audit services fees, US$4,417,000 (2014: US$4,503,000) and US$4,164,000 (2014: US$2,927,000) respectively are payable to the Company’s auditor.



5 Interest Expenses from Continuing Operations

2015 2014US$’000 US$’000

Non-cash interest expenses on purchase consideration payable for

acquisitions and long-term notes 6,662 9,976

Cash interest on bank loans and overdrafts, long-term notes 92,879 95,203

99,541 105,179

6 Taxation from Continuing OperationsHong Kong profits tax has been provided for at the rate of 16.5% (2014: 16.5%) on the estimated assessable profits for the year.

Taxation on overseas profits has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing

in the countries in which the Group operates.

The amount of taxation charged to the consolidated profit and loss account represents:

2015 2014US$’000 US$’000

Current taxation

– Hong Kong profits tax 9,204 11,394

– Overseas taxation 49,094 51,463

Under/(over) provision in prior years (Note) 2,968 (9,251)

Deferred taxation (Note 29) (3,376) 5,429

57,890 59,035

NOTE:Under/(over) provision of taxation in 2015 included a recognition of prior year unrecognized deferred tax assets of US$6,795,000.

The taxation on the Continuing Operations’ profit before taxation differs from the theoretical amount that would arise using the

taxation rate of the home country of the Company as follows:

2015 2014% %

Calculated at a taxation rate of 16.5 16.5

Effect of different taxation rates in other countries (4.5) (3.8)

Income net of expenses not subject to taxation (1.4) (1.9)

Under/(over) provision in prior years 0.6 (1.5)

Utilization of previously unrecognized tax losses (0.1) (0.1)

Unrecognized tax losses 0.3 0.2

Effective tax rate 11.4 9.4



7 Earnings/(Losses) per ShareThe calculation of basic earnings/(losses) per share is based on the Group’s profit attributable to Shareholders of US$421,046,000

(2014: US$441,276,000), which includes the Group’s profit attributable to Shareholders arising from the Continuing Operations

of US$421,046,000 (2014: US$539,398,000) and the Group’s losses attributable to Shareholders arising from the Discontinued

Operations of US$Nil (2014: US$98,122,000) and on the weighted average number of 8,351,640,000 (2014: 8,356,317,000) shares in

issue during the year.

The diluted earnings per share for the year ended 31 December 2015 was calculated by adjusting the weighted average number of

8,351,640,000 ordinary shares in issue by 38,460,000 to assume conversion of all dilutive potential ordinary shares granted under

the Company’s Share Option and Share Award Scheme. The diluted earnings/(losses) per share is the same as the basic earnings/

(losses) per share for the year ended 31 December 2014 as the potential ordinary shares in respect of outstanding Share Options

are anti-dilutive. For the determination of dilutive potential ordinary share granted under the Company, a calculation is done to

determine the number of shares that could have been acquired at fair value (determined as the average annual market share

price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding Share Options.

The number of shares calculated as above is compared with the number of shares that would have been issued assuming the

exercise of Share Options and vesting of Award Shares.



8 Dividends and Distribution in Specie

2015 2014US$’000 US$’000

Interim, paid, of HK$0.13 (equivalent to US$0.017)

(2014: HK$0.13 (equivalent to US$0.017)) per ordinary share 140,921 140,158

Final, proposed, of HK$0.15 (equivalent to US$0.019)

(2014: HK$0.21 (equivalent to US$0.027)) per ordinary share (Note (a)) 162,670 225,088

Full year 303,591 365,246

Special, proposed, of HK$Nil (equivalent to US$Nil)

(2014: HK$0.07 (equivalent to US$0.009)) per ordinary share (Note (a)) – 75,029

303,591 440,275

Distribution in specie (Note (b)) – 2,290,000

NOTES:(a) At a meeting held on 17 March 2016, the Directors proposed a final dividend of HK$0.15 (equivalent to US$0.019) per share. The proposed dividend is not reflected as a

dividend payable in these financial statements, but will be reflected as appropriation of retained earnings for the year ending 31 December 2016 (Note 25).

(b) The entire issued share capital of Global Brands was spun-off via a distribution in specie completed on 8 July 2014. Global Brands then became a separate listing company

on the main board of the Stock Exchange.

The transaction was recognized and measured in accordance with “HK(IFRIC) 17 – Distribution of Non-cash Assets to Owners”, which resulted in a non-cash gain of

approximately US$1,003,000 (Note 31).

9 Staff Costs including Directors’ Emoluments for Continuing Operations

2015 2014US$’000 US$’000

Salaries and bonuses 894,635 891,751

Staff benefits 41,064 42,214

Pension costs of defined contribution plans (Note) 61,859 58,559

Employee share option and share award expenses 23,583 228

Pension costs of defined benefit plans (Note 28) 2,549 1,711

Long-service payments 994 745

1,024,684 995,208

NOTE:Forfeited contributions totalling US$1,745,000 (2014: US$2,033,000) were utilized during the year and no remaining amount was available at the year-end to reduce future

contributions.



10 Directors’ and Senior Management’s Emoluments

(a) Five Highest Paid IndividualsThe five individuals whose emoluments were the highest in the Group for the year include three (2014: three) Directors whose

emoluments are reflected in the analysis shown in Note 40. The emoluments payable to the remaining two individuals who were

senior management (2014: two individuals) during the year are as follows:

2015 2014US$’000 US$’000

Basic salaries, housing allowances, share options, share awards, other allowances

and benefits-in-kind 1,875 1,915

Discretionary bonuses 1,600 5,796

Contributions to pension scheme 3 1

3,478 7,712

Number of IndividualsEmolument bands 2015 2014

HK$10,500,001 – HK$11,000,000 (approximately US$1,346,001 – US$1,410,000) 1 –

HK$16,000,001 – HK$16,500,000 (approximately US$2,051,001 – US$2,115,000) 1 –

HK$26,500,001 – HK$27,000,000 (approximately US$3,397,001 – US$3,462,000) – 1

HK$33,000,001 – HK$33,500,000 (approximately US$4,231,001 – US$4,295,000) – 1

There is no amount paid or payable to the directors as inducement to join the Group and compensation for loss of office as

directors.

(b) Senior Management’s EmolumentsThe emoluments payable to the remaining eight senior management (2014: ten senior management) during the year fell within the

following bands:

Number of IndividualsEmolument bands 2015 2014

Below US$1,000,000 3 2

US$1,000,001 – US$1,500,000 5 5

US$1,500,001 – US$2,000,000 – 2

US$2,500,001 – US$3,000,000 – 1



11 Intangible Assets

Other Intangible Assets

Goodwill

System Development,

Software and Other

License Costs

Buying Agency

AgreementsCustomer

Relationships

Patents, Trademarks

and Brand Names Others Total

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

At 1 January 2015

Cost 3,910,770 86,858 67,867 403,327 50,641 12,583 4,532,046

Accumulated amortization – (53,019) (21,431) (98,154) (9,224) (1,135) (182,963)

Net Book Amount 3,910,770 33,839 46,436 305,173 41,417 11,448 4,349,083


Opening net book amount 3,910,770 33,839 46,436 305,173 41,417 11,448 4,349,083

Exchange differences (33,518) (1,813) – (2,281) (1,179) 89 (38,702)

Adjustments to purchase

consideration payable for

acquisitions and net asset

value (Note (i)) 559 – – – – (155) 404

Additions – 7,103 – – – – 7,103

Disposals – (2,075) – – – – (2,075)

Amortization – (14,538) (3,875) (26,614) (3,447) (476) (48,950)

Closing Net Book Amount 3,877,811 22,516 42,561 276,278 36,791 10,906 4,266,863

At 31 December 2015

Cost 3,877,811 76,508 67,867 400,124 49,211 12,521 4,484,042

Accumulated amortization – (53,992) (25,306) (123,846) (12,420) (1,615) (217,179)

Net Book Amount 3,877,811 22,516 42,561 276,278 36,791 10,906 4,266,863



11 Intangible Assets (continued)

Other Intangible Assets

Goodwill

System Development, Software and Other License

Costs

Buying Agency and

License Agreements

Customer Relationships

Licensor Relationships

Patents, Trademarks

and Brand Names Others Total

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

At 1 January 2014

Cost 6,390,701 953,683 93,967 576,284 145,032 199,249 3,534 8,362,450

Accumulated amortization – (507,138) (24,783) (139,217) (40,997) (40,087) (1,672) (753,894)

Net Book Amount 6,390,701 446,545 69,184 437,067 104,035 159,162 1,862 7,608,556


Opening net book amount 6,390,701 446,545 69,184 437,067 104,035 159,162 1,862 7,608,556


Exchange differences (57,849) (2,321) – (2,740) – (1,475) – (64,385)

Acquisition of businesses 85,136 – – – – – 11,704 96,840

Adjustments to purchase consideration

payable for acquisitions and net

asset value (Note (i)) 13,274 – – – – – – 13,274


payable for acquisitions completed prior

to 1 January 2010 (Note (ii)) (869) – – – – – – (869)

Additions – 14,247 7,000 – – – 456 21,703

Amortization – (14,574) (3,875) (27,115) – (3,634) (838) (50,036)


Exchange differences 11,251 (317) – 2,473 (793) (2,904) – 9,710

Acquisition of businesses 66,853 – – – 8,382 – – 75,235


payable for acquisitions and net

asset value 14,581 – – – – – – 14,581

Additions – 142,210 – – – – – 142,210

Amortization – (78,834) (1,157) (11,941) (6,961) (5,652) (90) (104,635)

Distribution in specie (2,612,308) (473,117) (24,716) (92,571) (104,663) (104,080) (1,646) (3,413,101)

Closing Net Book Amount 3,910,770 33,839 46,436 305,173 – 41,417 11,448 4,349,083

At 31 December 2014

Cost 3,910,770 86,858 67,867 403,327 – 50,641 12,583 4,532,046

Accumulated amortization – (53,019) (21,431) (98,154) – (9,224) (1,135) (182,963)

Net Book Amount 3,910,770 33,839 46,436 305,173 – 41,417 11,448 4,349,083



11 Intangible Assets (continued)

NOTES:(i) These are adjustments to purchase consideration payable for acquisitions and net asset values related to certain acquisitions of businesses in the prior year, which were

previously determined on a provisional basis. During the measurement period of twelve months following a transaction, the Company recognized adjustments to the

provisional amounts as if the accounting for the business combination had been completed at the acquisition date. Save as adjustments to goodwill and other intangible

assets arising from business combination stated above, there were corresponding net adjustments to other assets/liabilities of approximately US$404,000 (2014: US$16,000)

and no adjustment to purchase consideration payable for acquisitions (2014: US$13,258,000).

(ii) For acquisitions completed prior to 1 January 2010, the effective date of HKFRS 3 (Revised) “Business Combination” being adopted by the Group, the changes in accrued

contingent considerations determined based on post-acquisition performance were made against goodwill.

Amortization of system development, software and other license costs of US$5,273,000 (2014: US$4,701,000) and US$9,265,000

(2014: US$9,873,000) have been expensed in merchandising and administrative expenses and selling and distribution expenses

respectively.

Impairment Test for GoodwillGoodwill is allocated to the Group’s cash-generating units (“CGUs”) identified according to operating segment.

A summary of goodwill by reporting segment is presented below.


US$’000 US$’000

Trading Network 3,321,708 3,356,883

Logistics Network 556,103 553,887

3,877,811 3,910,770

In accordance with HKAS 36 “Impairment of Assets” the Group completed its annual impairment test for goodwill allocated to the

Group’s various CGUs by comparing their recoverable amounts to their carrying amounts as at the balance sheet date. Goodwill

impairment reviews have been performed at the lowest level of CGU which generates cash flow independently. The recoverable

amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on a

one-year financial budget approved by management, extrapolated perpetually with an estimated general long-term continuous

annual growth of not more than 5%. The discount rate used of approximately 11% is pre-tax and reflects specific risks related to

the relevant segments. The budgeted gross margin and net profit margin are determined by management for each individual CGU

based on past performance and its expectations for market development. Management believes that any reasonably foreseeable

changes in any of the above key assumptions would not cause the carrying amount of goodwill to exceed the recoverable amount.



12 Property, Plant and Equipment

Land and Buildings

Leasehold Improvements

Furniture, Fixtures and

EquipmentPlant and

Machinery

Motor Vehicles and Company

Boat TotalUS$’000 US$’000 US$’000 US$’000 US$’000 US$’000

At 1 January 2015

Cost 18,188 199,319 184,332 141,861 7,814 551,514

Accumulated depreciation (2,424) (131,732) (120,951) (49,158) (2,342) (306,607)

Net Book Amount 15,764 67,587 63,381 92,703 5,472 244,907


Opening net book amount 15,764 67,587 63,381 92,703 5,472 244,907

Exchange differences (1,425) (1,951) (3,025) (7,075) (150) (13,626)

Additions 467 22,387 32,332 20,086 2,818 78,090

Disposals (533) (2,020) (1,833) (1,545) (308) (6,239)

Depreciation (606) (20,442) (22,833) (15,998) (1,627) (61,506)

Closing Net Book Amount 13,667 65,561 68,022 88,171 6,205 241,626

At 31 December 2015

Cost 14,801 197,765 186,443 132,573 7,508 539,090


Net Book Amount 13,667 65,561 68,022 88,171 6,205 241,626



12 Property, Plant and Equipment (continued)

Land and Buildings

Leasehold Improvements

Furniture, Fixtures and

EquipmentPlant and

Machinery

Motor Vehicles and Company

Boat TotalUS$’000 US$’000 US$’000 US$’000 US$’000 US$’000

At 1 January 2014

Cost 19,179 339,070 280,932 155,695 12,457 807,333


Net Book Amount 17,204 196,664 109,562 108,070 8,099 439,599


Opening net book amount 17,204 196,664 109,562 108,070 8,099 439,599


Exchange differences (948) (1,221) (1,457) (3,795) (411) (7,832)

Additions 336 23,424 23,315 25,418 2,806 75,299

Disposals (137) (1,804) (968) (823) (309) (4,041)

Depreciation (691) (20,835) (23,810) (18,016) (1,595) (64,947)


Exchange differences – (49) 387 – (3) 335

Acquisition of businesses – 87 367 – – 454

Additions – 11,895 10,666 1,472 52 24,085

Disposals – (755) (979) – – (1,734)

Depreciation – (8,672) (12,540) (861) (45) (22,118)

Distribution in specie – (131,147) (41,162) (18,762) (3,122) (194,193)

Closing Net Book Amount 15,764 67,587 63,381 92,703 5,472 244,907

At 31 December 2014

Cost 18,188 199,319 184,332 141,861 7,814 551,514


Net Book Amount 15,764 67,587 63,381 92,703 5,472 244,907

Depreciation of US$33,973,000 (2014: US$36,436,000), US$19,075,000 (2014: US$19,568,000) and US$8,458,000 (2014: US$8,943,000)

has been expensed in merchandising and administrative expenses, selling and distribution expenses and cost of sales respectively.

At 31 December 2015, land and buildings of US$2,545,000 (2014: US$3,248,000) were pledged as security for the Group’s short-term

bank loans (Note 23).



13 Prepaid Premium for Land LeasesThe Group’s interests in leasehold land and land use rights represent prepaid operating lease payments and their net book value is

analyzed as follows:

2015 2014US$’000 US$’000

Beginning of the year 2,498 2,789

Amortization (119) (137)

Exchange differences (437) (154)

End of the year 1,942 2,498

Amortization of US$117,000 (2014: US$135,000) and US$2,000 (2014: US$2,000) has been expensed in selling and distribution

expenses and merchandising and administrative expenses respectively.

14 Associated Companies

2015 2014US$’000 US$’000


Acquisition of businesses – 3,735

Share of profits less losses of associated companies 1,570 1,373

Dividend received (1,436) (595)

Disposals (1,802) –


Total interests in associated companies 10,070 11,890

Details of principal associated companies are set out in Note 42.



15 Joint Venture2015 2014

US$’000 US$’000

Beginning of the year – 14,515


Addition 313 –



Share of profits less losses of joint ventures – 324


Total interest in joint venture 313 –

Details of principal joint venture is set out in Note 42.

16 Available-for-sale Financial Assets2015 2014

US$’000 US$’000


Fair value gains on available-for-sale financial assets, net of tax (Note 25) 126 40

Exchange differences 19 –

End of the year 3,854 3,709

Available-for-sale financial assets include the following:

2015 2014US$’000 US$’000

Unlisted investments (Note 38) 3,854 3,709

Available-for-sale financial assets are denominated in HK dollar.

17 Inventories

2015 2014US$’000 US$’000

Finished goods 502,447 482,326

Raw materials 63,555 82,965

566,002 565,291



18 Due from/(to) Related Companies

2015 2014US$’000 US$’000

Trade (Note (a))

Due from:

Associated companies 6,983 9,314

Other related companies 463,369 426,919

Non-trade (Note (b))

Due from:

Associated companies 355 326

Other related companies 16,232 75,406

486,939 511,965

Due to:

Other related companies (1,038) (48)

NOTES:(a) As of 31 December 2015, trade balances due from related companies of US$253,008,000 were current and the rest were less than 90 days past due. All balances were not

considered impaired.

(b) The amounts are unsecured, interest free and repayable on demand. The fair values of amounts due from related companies are approximately the same as the carrying

values.

19 Derivative Financial Instruments

2015 2014US$’000 US$’000

Forward foreign exchange contracts – assets (Note 38) 4,272 11,323

Gain in equity of US$2,812,000 (2014: US$8,889,000) on forward foreign exchange contracts as of 31 December 2015 will be

released to the consolidated profit and loss account at various dates between one month to one year from the balance sheet date

(Note 25).

For the years ended 31 December 2015 and 2014, no material amounts were recognized in the consolidated profit and loss account

arising from ineffective cash flow hedges.



20 Trade and Other Receivables

2015 2014US$’000 US$’000

Trade and bills receivable – net 1,689,413 1,864,021

Other receivables, prepayments and deposits 283,035 341,313

1,972,448 2,205,334

Less: non-current portion other receivables, prepayments and deposits (26,217) (7,570)

1,946,231 2,197,764

The fair values of the Group’s trade and other receivables were approximately the same as their carrying values as at 31 December

2015.

A significant portion of the Group’s business is on sight letter of credit, usance letter of credit up to a tenor of 120 days, documents

against payment or customers’ letter of credit to suppliers. The balance of the business is on open account terms which is often

covered by customers’ standby letters of credit, bank guarantees, credit insurance or under a back-to-back payment arrangement

with suppliers. The ageing of trade and bills receivable based on invoice date is as follows:

2015 2014US$’000 US$’000

Current to 90 days 1,595,433 1,783,736

91 to 180 days 83,376 69,773

181 to 360 days 7,900 8,580

Over 360 days 2,704 1,932

1,689,413 1,864,021

There is no concentration of credit risk with respect to trade receivables, as the Group has a large number of customers

internationally dispersed.

As of 31 December 2015, trade receivables of US$1,673,045,000 (2014: US$1,849,501,000) that were current or less than 90 days

past due are not considered impaired. Trade receivables of US$16,368,000 (2014: US$14,520,000) were past due over 90 days but

not considered to be impaired. These relate to a number of independent customers for whom there is no recent history of default.

The past due ageing of these trade receivables is as follows:

2015 2014US$’000 US$’000

91 to 180 days 7,596 10,093

Over 180 days 8,772 4,427

16,368 14,520

As of 31 December 2015, outstanding trade receivables of US$35,252,000 (2014: US$22,556,000) and other receivables of

US$11,316,000 (2014: US$29,401,000) were considered impaired and were fully provided. The individually impaired receivables

mainly relate to transactions in disputes.



20 Trade and Other Receivables (continued)

Movements in the Group’s provision for impairment of trade and other receivables are as follows:

2015 2014US$’000 US$’000

At 1 January 51,957 54,423


Provision for receivable impairment (Note 4) 23,918 31,984

Provision written off against receivables (14,397) (31,793)

Unused amounts reversed (Note 4) (2,336) (901)

Exchange difference (349) –


Provision for receivable impairment – 1,967

Provision written off against receivables (12,225) (526)

Unused amounts reversed – (48)


At 31 December 46,568 51,957

The creation and release of provision for impaired receivables have been included in “Selling and distribution expenses” in the

consolidated profit and loss account (Note 4). Amounts charged to the allowance account are generally written off, when there is

no expectation of recovering additional cash.

Save as disclosed as above, the other classes within trade and other receivables do not contain impaired assets.

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivables mentioned above.



20 Trade and Other Receivables (continued)

Certain subsidiaries of the Group transferred bills receivable balances amounting to US$33,681,000 (2014: US$33,834,000) to banks

in exchange for cash as at 31 December 2015. The transactions have been accounted for as collateralized bank advances.

The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:

2015 2014US$’000 US$’000

US dollar 1,185,258 1,331,239

HK dollar 121,486 146,643

Euro dollar 205,846 225,328

Pound sterling 75,001 87,657

Renminbi 143,031 140,810

Malaysia Ringgit 35,798 46,785

Thailand Baht 54,206 57,468

Others 125,605 161,834

1,946,231 2,197,764

21 Cash and Cash Equivalents

2015 2014US$’000 US$’000

Cash and bank balances 342,243 538,529

The effective interest rate at the balance sheet date on bank balances was 0.3% (2014: 0.5%) per annum; these deposits have an

average maturity period of 6 days (2014: 6 days).

22 Trade and Other Payables

2015 2014US$’000 US$’000

Trade and bills payable 2,464,785 2,561,172

Accrued charges and sundry payables 601,129 692,427

3,065,914 3,253,599

The fair values of the Group’s trade and other payables were approximately the same as their carrying values as at

31 December 2015.



22 Trade and Other Payables (continued)

At the balance sheet date, the ageing of trade and bills payable based on invoice date is as follows:

2015 2014US$’000 US$’000

Current to 90 days 2,365,315 2,491,454

91 to 180 days 80,822 55,420

181 to 360 days 2,885 12,241

Over 360 days 15,763 2,057

2,464,785 2,561,172

23 Bank Borrowings

2015 2014US$’000 US$’000

Long-term bank loans

– Unsecured (Note 27) 100,000 17,000

Short-term bank loans

– Secured 3,260 4,106

– Unsecured 92,559 158,744

95,819 162,850

Total bank borrowings 195,819 179,850

The fair values of the Group’s borrowings were approximately the same as their carrying values as at 31 December 2015.

The effective interest rates at the balance sheet date were as follows:

2015 2014USD RMB Others USD RMB Others

Long-term bank loans 1.5% – – 1.2% – –

Short-term bank loans 1.4% – 5.7% 2.5% 5.5% 6.2%

The Group’s contractual repricing dates for borrowings are all three months or less.

As at 31 December 2015, we had available bank loans and overdraft facilities of US$1,670 million comprising US$821 million

committed and US$849 million uncommitted facilities. Subsequent to the balance sheet date, additional committed facilities

were secured with extended tenure. At the date of this Report, the total committed facilities secured amounted to US$876 million,

of which US$726 million were revolving facilities with tenure up to three years due in 2019.



23 Bank Borrowings (continued)

The carrying amounts of the borrowings are denominated in the following currencies:

2015 2014US$’000 US$’000

US dollar 167,800 116,880

Renminbi – 36,554

Others 28,019 26,416

195,819 179,850

24 Share Capital, Options and Award Shares

No. of Shares Equivalent(in thousand) HK$’000 US$’000

Authorized

At 1 January 2014, ordinary shares of HK$0.0125 each 12,000,000 150,000 19,231

At 31 December 2014, ordinary shares of HK$0.0125 each 12,000,000 150,000 19,231



Issued and Fully Paid




Issue of new Shares of HK$0.0125 each pursuant to

Share Award Scheme (Note) 55,049 688 89


NOTE:The closing market price per share on the date of the issue of new shares on 22 May 2015 was HK$7.32 per Share.



24 Share Capital, Options and Award Shares (continued)

Details of Share Options granted by the Company pursuant to the 2003 Option Scheme and 2014 Option Scheme and outstanding at

31 December 2015 are as follows:

ExercisePriceHK$

Number of Share Options

Grant Date Exercisable PeriodAs at

1/1/2015 Granted LapsedAs at

31/12/2015

11/4/2011 16.901 1/5/2012-30/4/2015 22,318,000 – (22,318,000) –

21/11/2011 12.711 1/5/2012-30/4/2015 1,380,000 – (1,380,000) –

22/12/2011 12.121 1/5/2013-30/4/2015 2,000,000 – (2,000,000) –

22/12/2011 12.121 1/5/2014-30/4/2016 2,000,000 – – 2,000,000

22/12/2011 12.121 1/5/2015-30/4/2017 2,000,000 – – 2,000,000

22/12/2011 12.121 1/5/2016-30/4/2018 2,000,000 – – 2,000,000

22/12/2011 12.121 1/5/2017-30/4/2019 2,000,000 – – 2,000,000

22/12/2011 12.121 1/5/2018-30/4/2020 2,000,000 – – 2,000,000

22/12/2011 12.121 1/5/2019-30/4/2021 2,000,000 – – 2,000,000

22/12/2011 12.121 1/5/2020-30/4/2022 2,000,000 – – 2,000,000

22/12/2011 12.121 1/5/2021-30/4/2023 2,000,000 – – 2,000,000

21/5/2015 7.49 1/1/2016-31/12/2017 – 28,878,000 (604,000) 28,274,000

21/5/2015 7.49 1/1/2017-31/12/2018 – 30,539,000 (604,000) 29,935,000

21/5/2015 7.49 1/1/2018-31/12/2019 – 30,690,000 (604,000) 30,086,000

16/11/2015 5.81 1/1/2017-31/12/2018 – 285,000 – 285,000

16/11/2015 5.81 1/1/2018-31/12/2019 – 604,000 – 604,000

Total 41,698,000 90,996,000 (27,510,000) 105,184,000

NOTE:(1) Following the spin-off and separate listing of Global Brands, the exercise price applicable to the Share Options outstanding on the record date for the distribution in specie


Subsequent to 31 December 2015, no Shares have been allotted and issued under the Share Option Scheme.

The Share Options outstanding at 31 December 2015 had a weighted average remaining contractual life of 3.15 years

(2014: 2.06 years).




Employee share option expenses charged to the consolidated profit and loss account are determined using the Black-Scholes

valuation model based on the following assumptions:

Grant Date 11/4/2011 21/11/2011 22/12/2011 21/5/2015 16/11/2015

Option value (Note (i)) US$0.45 –

US$0.57

US$0.42 –

US$0.53

US$0.45 –

US$0.77

US$0.13 –

US$0.17

US$0.09 –

US$0.11

Share price at grant date

(Note (i))

HK$20.21 HK$14.24 HK$14.14 HK$7.49 HK$5.33

Exercisable price (Note (i)) HK$16.90

(Note (ii))

HK$12.71

(Note (ii))

HK$12.12

(Note (ii))

HK$7.49 HK$5.81

Standard deviation 33% 48% 49% 33% 31%

Annual risk-free interest rate 0.29%-1.80% 0.14%-0.84% 0.15%-1.35% 0.08%-1.22% 0.08%-1.25%

Life of options 4–5 years 4–5 years 4–12 years 2–5 years 3–5 years

Dividend yield 2.39% 2.39% 2.39% 4.06% 4.06%

NOTES:(i) Prior year information has been adjusted for the effect of the Bonus Issue in May 2006 and the Share Subdivision in May 2011.

(ii) Following the spin-off and separate listing of Global Brands, the exercise price applicable to the Share Options outstanding on the record date for the distribution in specie





Details of Award Shares granted by the Company pursuant to the Share Award Scheme and outstanding at 31 December 2015 are

as follows:

Fair Value per Share

HK$

Number of Award Shares

Grant Date Vesting DateAs at

1/1/2015 Granted VestedUnvested/ Forfeited

As at31/12/2015

21/5/2015 7.49 31/12/2015 – 6,433,000 (6,190,800) (242,200) –

21/5/2015 7.49 31/12/2016 – 13,623,500 – (515,400) 13,108,100

21/5/2015 7.49 31/12/2017 – 20,890,000 – (792,500) 20,097,500

21/5/2015 7.49 31/12/2018 – 14,465,000 – (550,700) 13,914,300

21/5/2015 7.49 31/12/2019 – 7,271,500 – (277,200) 6,994,300

16/11/2015 5.33 31/12/2016 – 100,600 – – 100,600

16/11/2015 5.33 31/12/2017 – 346,400 – – 346,400

16/11/2015 5.33 31/12/2018 – 342,100 – – 342,100

16/11/2015 5.33 31/12/2019 – 245,900 – – 245,900

Total – 63,718,000 (6,190,800) (2,378,000) 55,149,200

The fair value of the Award Shares was calculated based on the market price of the Company’s shares at the respective grant date.

During 2015, a total of 63,718,000 Award Shares were granted. 7,634,000 Award Shares were purchased from open market and

55,049,000 Award Shares were allotted and issued at nominal value. The balance of 1,035,000 Award Shares were satisfied by the

Award Shares which had not been vested and/or been forfeited in accordance with the terms of the Share Award Scheme.



25 Reserves

Treasury Share

Capital Reserve

Contribution Surplus

Employee Share-Based

Compensation Reserve

Revaluation Reserve

Hedging Reserve

Defined Benefit

Obligation Reserve

Exchange Reserve Total

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000(Note (iii)) (Note (i)) (Note (ii))

Balance at 1 January 2015 (6,739) 3,922 710,000 37,049 2,719 8,889 (11,066) (110,676) 634,098

Other Comprehensive (Expense)/

Income

Currency translation differences – – – – – – – (82,617) (82,617)

Net fair value gains on available-for-sale

financial assets, net of tax (Note 16) – – – – 126 – – – 126

Net fair value losses on cash flow hedges,

net of tax – – – – – (6,077) – – (6,077)

Remeasurements from post-

employment benefits recognized

in reserve, net of tax – – – – – – (63) – (63)

Transactions with Owners in their

Capacity as Owners

Issue of new shares for Share Award

Scheme (89) – – – – – – – (89)

Purchase of shares for Share Award Scheme (7,300) – – – – – – – (7,300)

Employee Share Option and Share

Award Scheme:

– value of employee services – – – 23,583 – – – – 23,583

– vesting of shares for Share Award

Scheme 828 – – (5,970) – – – – (5,142)

Transfer from capital reserve – (1,616) – – – – – – (1,616)

Balance at 31 December 2015 (13,300) 2,306 710,000 54,662 2,845 2,812 (11,129) (193,293) 554,903



25 Reserves (continued)

Treasury Share

Capital Reserve


Employee Share-Based


Revaluation Reserve

Hedging Reserve

Defined Benefit

Obligation Reserve

Exchange Reserve Total

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000(Note (iii)) (Note (i)) (Note (ii))

Balance at 1 January 2014 (6,739) 3,835 – 36,821 2,679 (1,413) (10,338) (18,342) 6,503

Other Comprehensive (Expense)/

Income

Currency translation differences – – – – – – – (92,334) (92,334)

Net fair value gains on available-for-sale

financial assets, net of tax (Note 16) – – – – 40 – – – 40

Net fair value gains on cash flow hedges,

net of tax – – – – – 10,302 – – 10,302

Remeasurements from post-employment

benefits recognized in reserve,

net of tax – – – – – – (728) – (728)

Transactions with Owners in their

Capacity as Owners


– value of employee services – – – 228 – – – – 228

Share premium reduction – – 3,000,000 – – – – – 3,000,000

Distribution in specie – – (2,290,000) – – – – – (2,290,000)

Transfer to capital reserve – 87 – – – – – – 87

Balance at 31 December 2014 (6,739) 3,922 710,000 37,049 2,719 8,889 (11,066) (110,676) 634,098

NOTES:(i) Capital reserve represents amount set aside from the profit of certain overseas subsidiaries of the Group in accordance with local statutory requirements.

(ii) During 2014, US$3,000,000,000 contributed surplus was created by reduction of the share premium of the Company and US$2,290,000,000 was distributed due to spin-off

of Global Brands Group.

(iii) Treasury share represents the excess share issued for settlement of consideration for certain prior year acquisitions held by the escrow agent and shares issued and

purchased for Share Award Scheme held by the trustee.



26 Perpetual Capital SecuritiesOn 8 November 2012, the Company issued perpetual subordinated capital securities (the “Perpetual Capital Securities”) with an

aggregate principal amount of US$500 million. The Perpetual Capital Securities do not have maturity date and the distribution

payments can be deferred at the discretion of the Company. Therefore, the Perpetual Capital Securities are classified as equity

instruments and recorded in equity in the consolidated balance sheet. The amounts as at 31 December 2015 and 2014 included the

accrued distribution payments.

27 Long-term Liabilities

2015 2014US$’000 US$’000

Long-term bank loans – unsecured (Note 23) 100,000 17,000

Long-term notes – unsecured 1,253,823 1,254,369

Purchase consideration payable for acquisitions 242,502 458,080

Other long-term liabilities 16,420 8,375

1,612,745 1,737,824

Current portion of purchase consideration payable for acquisitions (86,266) (134,468)

1,526,479 1,603,356

Purchase consideration payable for acquisitions is unsecured, interest-free and not repayable within twelve months. Unsecured

long-term notes issued to independent third parties in 2007 of US$499,338,000 will mature in 2017 and bear annual coupon of 5.5%.

Unsecured long-term notes issued to independent third parties in 2010 of US$754,485,000 will mature in 2020 and bear annual

coupon of 5.25%.

Balance of purchase consideration payable for acquisitions as at 31 December 2015 amounted to US$242,502,000 (2014:

US$458,080,000), of which US$181,186,000 (2014: US$304,440,000) was primarily earn-out and US$61,316,000 (2014:

US$153,640,000) was earn-up. Earn-out is a contingent consideration that will be realized if the acquired businesses achieve their

respective base year profit target, calculated on certain predetermined basis, during the designated periods of time. Earn-up is

contingent consideration that will be realized if the acquired businesses achieve certain growth targets, calculated based on the

base year profits, during the designated period of time.

Earn-out and earn-up of certain acquisitions were remeasured during the year, details are set out in Note 4, Note 11 and Note 38.



27 Long-term Liabilities (continued)

The maturity of the financial liabilities is as follows:

2015 2014US$’000 US$’000

Within 1 year 86,266 134,468

Between 1 and 2 years 667,776 102,886

Between 2 and 5 years 842,283 736,583

Wholly repayable within 5 years 1,596,325 973,937

Over 5 years – 755,512

1,596,325 1,729,449

The fair values of the financial liabilities (non-current portion) are as follows:

2015 2014US$’000 US$’000

Long-term bank loans – unsecured 100,000 17,000

Long-term notes – unsecured 1,326,280 1,353,418

Purchase consideration payable for acquisitions 156,236 323,612

1,582,516 1,694,030

The carrying amounts of financial liabilities are denominated in the following currencies:

2015 2014US$’000 US$’000

US dollar 1,519,018 1,606,959

Pound sterling 18,547 25,679

Euro dollar – 5,485

Others 58,760 91,326

1,596,325 1,729,449



28 Post-employment Benefit Obligations

2015 2014US$’000 US$’000

Pension obligations (Note) 16,813 16,949

Long-service payment liabilities 5,096 5,350

21,909 22,299

NOTE:The Group participates in a number of defined benefit plans in certain countries. Most of these pension plans are final salary defined benefit plans. The assets of the funded

plans are held independently of the Group’s assets in separate trustee-administered funds. The Group’s defined benefit plans are valued by qualified actuaries annually using

the projected unit credit method.

(i) The amount recognized in the consolidated balance sheet is determined as follows:

2015 2014US$’000 US$’000

Present value of funded obligations 39,642 40,922

Fair value of plan assets (22,829) (23,973)

Net liabilities in the consolidated balance sheet 16,813 16,949

(ii) The amount recognized in the consolidated profit and loss account is as follows:

2015 2014US$’000 US$’000

Current service cost 1,757 1,975

Past service cost and loss/(gain) on settlements 243 (931)

Administrative expenses paid 102 131

Net interest expense 447 536

Total, included in staff costs (Note 9) 2,549 1,711

(iii) The movements in the fair value of plan assets during the year are as follows:

2015 2014US$’000 US$’000

At 1 January 23,973 28,684

Interest income 675 959

Exchange differences (995) (1,321)

Administrative expenses paid (102) (131)

Contributions 1,331 1,343

Benefits paid (1,972) (9,134)

Actuarial (loss)/gain on plan assets (81) 3,573

At 31 December 22,829 23,973



28 Post-employment Benefit Obligations (continued)

(iv) Movements in the defined benefit obligation are as follows:

2015 2014US$’000 US$’000

At 1 January 40,922 44,838

Current service cost 1,757 1,975

Interest cost 1,122 1,495

Past service cost and loss/(gain) on settlements 243 (931)

Actuarial loss/(gain) from changes in experiences 1,616 (1,575)

Actuarial losses from changes in financial assumptions 125 6,632

Actuarial (gain)/loss from changes in demographic assumptions (1,026) 1

Exchange differences (1,860) (2,121)

Benefits paid (3,257) (9,392)

At 31 December 39,642 40,922

(v) The movements in net defined benefit liabilities recognized in the consolidated balance sheet are as follows:

2015 2014US$’000 US$’000

At 1 January 16,949 16,154


Total expense charged in the consolidated profit and loss account 2,549 1,711

Remeasurements losses recognized in other comprehensive income 796 1,485

Contributions paid (1,331) (1,343)

Benefits paid (1,285) (258)

At 31 December 16,813 16,949




(vi) The principal actuarial assumptions used for accounting purposes are:

2015 2014% %

Discount rate 1.0-8.9 1.6-8.1

Salary growth rate 2.0-8.0 3.0-8.0

Pension growth rate 1.5-4.5 1.5-4.5

The sensitivity of the defined benefit obligation to changes in the principal assumption is:

Impact on Defined Benefit Obligation

Change in Assumption

Increase in Assumption

Decrease in Assumption

Discount rate ±0.25% –2.74% +2.86%

The above sensitivity analysis is based on a change in discount rate while holding all other assumptions constant. In practice, this

is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined

benefit obligation to significant actuarial assumptions the same method has been applied as when calculating the pension liability

recognized within the consolidated balance sheet.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

(vii) Plan assets comprised:

2015 2014US$’000 US$’000

Quoted Assets

Cash and cash equivalents 8,061 8,416

Equity instruments

European 2,781 6,210

American 621 –

Asian 800 –

Global 4 –

Debt instruments

Government securities 5,117 4,172

Other securities and debt instruments 3,151 3,468

Investment funds

Unit investment trust funds 1,436 1,660

Investment bond funds 735 –

Mutual funds 9 47

Others 114 –

22,829 23,973

The weighted average duration of the defined benefit obligation ranges from 7.6 to 20.9 years.




(viii) Expected maturity analysis of benefit payments:

At 31 December 2015Within

10 yearsBetween

10-20 yearsBeyond

20 yearsUS$’000 US$’000 US$’000

Expected benefit payments 27,576 37,659 34,384

The Group is exposed to a number of risks in relation to the defined benefit obligation, the most significant of which are detailed

below:

Investment risk The defined benefit pension holds investments in asset classes, such as equities, which have volatile

market values and while these assets are expected to provide real returns over the long term, the short

term volatility can cause additional funding to be required if a deficit emerges.

Interest rate risk The defined benefit pension’s liabilities are assessed using market yields on high quality corporate bonds

to discount the liabilities. In countries where there is no deep market in such bonds, the market yields on

government bonds are used. As the defined benefit pension holds assets such as equities, the value of the

assets and liabilities may not move in the same way.

Inflation risk A significant proportion of the benefits under the defined benefit pension are linked to inflation. Although

the defined benefit pension’s assets are expected to provide a good hedge against inflation over the long

term, movements over the short term could lead to deficits emerging.

Mortality risk In the event that members live longer than assumed, a deficit will emerge in the defined benefit pension.

In case of the funded plans, the Group ensures that the investment positions are managed within an asset-liability matching (ALM)

framework that has been developed to achieve long-term investments that are in line with the obligations under the pension

schemes. Within this framework, the Group’s ALM objective is to match assets to the pension obligations by investing in long-term

fixed interest securities with maturities that match the benefit payments as they fall due and in the appropriate currency. The Group

actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising

from the pension obligations. The Group has not changed the processes used to manage its risks from previous periods. The Group

does not use derivatives to manage its risk. Investments are well diversified, such that the failure of any single investment would

not have a material impact on the overall level of assets.



29 Deferred TaxationDeferred taxation is calculated in full on temporary differences under the liability method using applicable taxation rates prevailing

in the countries in which the Group operates.

The movements in the net deferred tax (assets)/liabilities are as follows:

2015 2014US$’000 US$’000

At 1 January 7,278 18,769


(Credited)/charged to consolidated profit and loss account (Note 6) (3,376) 5,429

Recognition of prior year unrecognized deferred tax assets (Note 6) (6,795) –


Adjustments to purchase consideration payable for acquisitions and net asset value (128) –

Charged/(credited) to other comprehensive income 37 (359)

Charged/(credited) to hedging reserve 1,045 (186)

Exchange differences 776 671


Credited to consolidated profit and loss account – (20,106)



At 31 December (1,163) 7,278

Deferred tax assets are recognized for tax losses carried forward to the extent that realization of the related tax benefit through

future taxable profits is probable. The Group has unrecognized tax losses of US$164,974,000 (2014: US$183,874,000) to carry

forward against future taxable income, out of which US$13,674,000 will expire during 2016-2024. Deferred tax assets for these tax

losses are not recognized as it is not probable that related tax assets will be utilized in the foreseeable future.



29 Deferred Taxation (continued)

The movements in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances

within the same tax jurisdiction, are as follows:

Provisions

Decelerated Tax Depreciation Allowances Tax Losses Others Total

2015 2014 2015 2014 2015 2014 2015 2014 2015 2014Deferred Tax Assets US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

At 1 January 24,290 111,898 8,617 7,799 7,166 57,976 7,805 9,864 47,878 187,537


Credited/(charged) to consolidated

profit and loss account 707 (3,689) 1,271 1,395 8,895 (4,912) (3,228) (1,886) 7,645 (9,092)

Recognition of prior year

unrecognized deferred tax assets – – – – 6,795 – – – 6,795 –

(Charged)/credited to other

comprehensive income – – – – – – (37) 359 (37) 359

(Charged)/credited to hedging

reserve – – – – – – (1,045) 186 (1,045) 186

Exchange differences (960) 40 (206) (451) (276) (202) (20) (350) (1,462) (963)


Credited to consolidated profit

and loss account – 11,670 – – – 35,549 – – – 47,219

Distribution in specie – (95,629) – (126) – (81,245) – (368) – (177,368)

At 31 December 24,037 24,290 9,682 8,617 22,580 7,166 3,475 7,805 59,774 47,878



29 Deferred Taxation (continued)

Accelerated Tax Depreciation Allowances

Intangible Assets Arising from Business

Combinations Others Total2015 2014 2015 2014 2015 2014 2015 2014

Deferred Tax Liabilities US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

At 1 January 8,471 25,866 44,654 177,506 2,031 2,934 55,156 206,306


(Credited)/charged to consolidated

profit and loss account (1,252) (7,211) 4,448 4,382 1,073 (834) 4,269 (3,663)

Acquisition of businesses – – – 2,925 – – – 2,925

Adjustments to purchase

consideration payable for

acquisitions and net asset value – – (128) – – – (128) –

Exchange differences (723) (188) 56 (35) (19) (69) (686) (292)


Charged/(credited) to consolidated

profit and loss account – 6,266 – 20,847 – – – 27,113

Acquisition of businesses – – – 1,515 – – – 1,515

Distribution in specie – (16,262) – (162,486) – – – (178,748)

At 31 December 6,496 8,471 49,030 44,654 3,085 2,031 58,611 55,156

After offsetting balances within the same tax jurisdiction, the balances as disclosed in the consolidated balance sheet are as

follows:

2015 2014US$’000 US$’000

Deferred tax assets 36,527 32,493

Deferred tax liabilities (35,364) (39,771)

1,163 (7,278)

The amounts shown in the consolidated balance sheet include the following:

2015 2014US$’000 US$’000

Deferred tax assets to be recovered after more than 12 months 32,286 30,073

Deferred tax assets to be recovered within 12 months 4,241 2,420

Deferred tax liabilities to be settled after more than 12 months 33,829 31,635

Deferred tax liabilities to be settled within 12 months 1,535 8,136



30 Notes to the Consolidated Cash Flow Statement

(a) Reconciliation of Profit Before Taxation to Net Cash Inflow Generated from Operations of Continuing Operations

2015 2014US$’000 US$’000

Profit before taxation 506,775 626,803

Interest income (9,761) (6,984)

Interest expenses 99,541 105,179

Depreciation 61,506 64,947

Amortization of system development, software and other license costs 14,538 14,574

Amortization of other intangible assets 34,412 35,462

Amortization of prepaid premium for land leases 119 137

Share of profits less losses of associated companies (1,570) (1,373)

Employee share option and share award expenses 23,583 228

Loss on disposal of an associated company 423 –

Loss on disposal of property, plant and equipment, net 1,679 1,363

Gain on remeasurement of contingent consideration payable (116,973) (176,007)

Operating profit before working capital changes 614,272 664,329

(Increase)/decrease in inventories (711) 31,434

Decrease/(increase) in trade and bills receivable, other receivables, prepayments

and deposits and amounts due from related companies 161,537 (60,690)

(Decrease)/increase in trade and bills payable, accrued charges and sundry payables

and amounts due to related companies (166,334) 57,492

Net cash inflow generated from operations 608,764 692,565



30 Notes to the Consolidated Cash Flow Statement (continued)

(b) Analysis of Changes in Financing Activities During the Year

2015 2014

Share Capital Including

Share Premium Bank Loans

Share Capital Including

Share Premium Bank Loans

US$’000 US$’000 US$’000 US$’000(Note 24 & 25) (Note 24 & 25)

At 1 January 712,874 179,850 3,712,874 210,785

Non-cash movement

Issue of shares for Share Award Scheme 89 – – –

Vesting of shares for Share Award Scheme 5,142 – – –

Share premium reduction – – (3,000,000) –

718,105 179,850 712,874 210,785


Net drawdown/(repayment) of bank loans – 15,969 – (28,594)


Net drawdown of bank loans – – – 725,113

Distribution in specie – – – (727,454)

At 31 December 718,105 195,819 712,874 179,850



30 Notes to the Consolidated Cash Flow Statement (continued)

(c) Distribution in SpecieDetails of net assets of Global Brands Group at date of distribution in specie are set out below:

2014US$’000

Net assets distributed

Intangible assets 3,413,101

Property, plant and equipment 194,193

Other non-current assets 39,946

Trade and other receivables 407,963

Cash and cash equivalents 204,601

Other current assets* 576,558

Trade and other payables (800,980)

Other current liabilities (238,502)

Other non-current liabilities (879,038)

Purchase consideration payable for acquisitions (628,845)

Book value of net assets distributed 2,288,997

* Amounts adjusted to eliminate impacts between the Continuing Operations and the Discontinued Operations.

Analysis of net outflow of cash and cash equivalents in respect of the distribution in specie:

2014US$’000

Cash proceeds on distribution in specie –

Cash and cash equivalent distributed 204,601

Net cash outflow of cash and cash equivalents in respect of distribution in specie 204,601

Analysis of net gain on distribution in specie:

2014US$’000

Fair value of Global Brands Group 2,290,000

Less: Net assets value of Global Brands Group (2,288,997)

Net gain on distribution in specie 1,003

31 Discontinued OperationsThe consolidated results of Global Brands Group are presented in the consolidated profit and loss account as Discontinued

Operations in accordance with HKFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”. The consolidated

statement of comprehensive income and consolidated cash flow statement distinguish the Discontinued Operations from the

Continuing Operations.



31 Discontinued Operations (continued)

Results of the Discontinued Operations have been included in the consolidated profit and loss account as follows:

For the Period from

1 January 2014 to 8 July 2014

US$’000

Turnover 1,393,940

Cost of sales* (981,285)

Gross profit 412,655

Other income 32

Total margin 412,687

Selling and distribution expenses (235,439)

Merchandising and administrative expenses (240,469)

Core operating loss (63,221)

Gain on remeasurement of contingent consideration payable 19,667


Professional fees for Spin-off (11,860)

One-off reorganization costs for Spin-off (16,880)

Other non-core operating expenses (2,001)

Operating loss (100,096)

Interest income 29

Interest expenses



(16,588)

Share of profits less losses of joint ventures 324

Loss before taxation (116,331)

Taxation 17,206

Loss for the period (99,125)

Net gain on distribution in specie (Note 8(b)) 1,003

Net loss attributable to Shareholders of the Company (98,122)

* Amounts before elimination of transactions between Continuing Operations and Discontinued Operations of US$782,598,000.

Details of other financial information of the Discontinued Operations for the period from 1 January 2014 to 8 July 2014 were set out

in 2014 Annual Report.



32 Contingent Liabilities

2015 2014US$’000 US$’000

Guarantees in respect of banking facilities granted to:

Associated companies 750 750

33 Commitments from Continuing Operations

(a) Operating Lease CommitmentsThe Continuing Operations leases various offices and warehouses under non-cancellable operating lease agreements. The lease

terms are between 1 and 26 years. At 31 December 2015, the Continuing Operations had total future aggregate minimum lease

payments under non-cancellable operating leases as follows:

2015 2014US$’000 US$’000

Within one year 139,170 157,535

In the second to fifth year inclusive 209,399 294,639

After the fifth year 119,010 128,321

467,579 580,495

(b) Capital Commitments

2015 2014US$’000 US$’000

Contracted but not provided for:

Property, plant and equipment 1,945 17,046

System development, software and other license costs 1,170 –

3,115 17,046

34 Charges on AssetsSave as disclosed in Note 12, there were no charges on the assets and undertakings of the Group as at 31 December 2015 and 2014.



35 Related Party TransactionsThe Continuing Operations had the following material transactions with its related parties during the year ended 31 December 2015

and 2014:

2015 2014Note US$’000 US$’000

Distribution and sales of goods (i) 28,128 11,612Operating leases rental paid (ii) 26,018 24,549Turnover on buying agency services provided (iii) 1,627,351 891,587Rental and license fee paid (iv) 2,287 3,190Rental and license fee received (iv) 3,464 2,027Logistics-related services income (v) 10,894 10,342

(i) Pursuant to the master distribution and sales of goods agreement entered into on 5 December 2014 with FH (1937) for a

term of three years ending 31 December 2017, certain distribution and sales of goods was made on mutually agreed normal

commercial terms with FH (1937) and its associates.

(ii) Pursuant to the master agreement for leasing of properties dated 6 December 2013 entered into with FH (1937) for a term

of three years ending 31 December 2016, the Continuing Operations had rental charge for certain properties leased from FH

(1937) and its associates during the period based on mutually agreed normal commercial terms.

(iii) Pursuant to the buying agency agreement entered into with Global Brands Group on 24 June 2014, the Continuing Operations

provided buying agency services to Global Brands Group and its associates for a term of three years from the listing date of

Global Brands Group. For the year ended 31 December 2015, the Continuing Operations provided buying agency services to

Global Brands Group with an aggregate turnover of approximately US$1,627,351,000 (for the period from 9 July 2014 to 31

December 2014: US$891,587,000).

(iv) Pursuant to the master property agreement entered into with Global Brands Group on 24 June 2014, the Continuing Operations

and Global Brands Group had rental and license fee to and from one another for certain properties and license offices,

showroom and warehouse premises on mutually agreed terms from the listing date of Global Brands Group to 31 December

2016. For the year ended 31 December 2015, aggregate rental and license fee paid to and from one another approximated to

US$5,751,000 (for the period from 9 July 2014 to 31 December 2014: US$5,217,000).

(v) Pursuant to the master agreement for provision of logistics-related services entered into on 20 August 2015, the Continuing

Operations provided certain logistics-related services to FH (1937) and its associates during the year. The aggregate

service income, excluding the passed-through costs for direct freight forwarding, approximated to US$10,894,000 (2014:

US$10,342,000).

The foregoing related party transactions also fall under the definition of continuing connected transactions of the Company as

stipulated in the Listing Rules on the Stock Exchange.

During 2014, there were certain expenses incurred by FH (1937) and recharged to the Continuing Operations amounting to

approximately US$1,000,000.

No transactions have been entered with the directors of the Company (being the key management personnel) during the year other

than the emoluments paid to them (being the key management personnel compensation) as disclosed in Notes 10 and 40.

Save as above, the Continuing Operations had no material related party transactions during the year.



36 Financial Risk ManagementThe Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, fair value interest rate

risk, cash flow interest rate risk and price risk), credit risk, and liquidity risk. The Group’s overall risk management program focuses

on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance.

The Group uses derivative financial instruments to hedge certain risk exposures.

(a) Market Risk

(I) FOREIGN EXCHANGE RISK

Most of the Group’s cash balances were deposits in HK$ and US$ with major global financial institutions, and the Group’s revenues

and payments were transacted predominantly in US$. Therefore, it considers there is no significant risk exposure in relation to

foreign exchange rate fluctuations.

There are small portion of sales and purchases transacted in different currencies, for which the Group arranges hedging by means

of foreign exchange forward contracts. Other than this, the Group strictly prohibits any financial derivative arrangement merely for

speculation.

At 31 December 2015, if the major foreign currencies, such as Euro dollar and Sterling Pound, to which the Group had exposure had

strengthened/weakened by 10% (2014: 10%) against US and HK dollar with all other variables held constant, profit for the year and

equity would have been approximately 2.2% (2014: 2.0%) and 3.5% (2014: 3.7%) higher/lower, mainly as a result of foreign exchange

gains/losses on translation of foreign currencies denominated trade receivables, borrowings and intangible assets.

(II) PRICE RISK

The Group is exposed to price risk because of investments held by the Group and classified on the consolidated balance sheet as

available-for-sale financial assets. The Group maintains these investments for long-term strategic purposes and the Group’s overall

exposure to price risk is not significant.

At 31 December 2015 and up to the report date of the financial statements, the Group held no material financial derivative

instruments except for certain foreign exchange forward contracts entered into for hedging of foreign exchange risk exposure on

sales and purchases transacted in different currencies. At 31 December 2015, the fair value of foreign exchange forward contracts

entered into by the Group amounted to US$4,272,000 (2014: US$11,323,000), which has been reflected in full in the Group’s

consolidated balance sheet as derivative financial instruments assets.

(III) CASH FLOW AND FAIR VALUE INTEREST RATE RISK

As the Group has no significant interest-bearing assets, the Group’s income and operating cash flows are substantially independent

of changes in market interest rates.

The Group’s interest rate risk arises mainly from US dollar denominated bank borrowings and the US dollar denominated long-term

notes issued. Bank borrowings at variable rates expose the Group to cash flow interest rate risk. The Group’s policy is to maintain a

diversified mix of variable and fixed rate borrowings based on prevailing market conditions.

At 31 December 2015, if the variable interest rates on the bank borrowings had been 0.1% higher/lower with all other variables held

constant, profit for the year and equity would have been approximately US$1,273,000 (2014: US$811,000) lower/higher, mainly as a

result of higher/lower interest expenses on floating rate borrowings.



36 Financial Risk Management (continued)

(b) Credit RiskCredit risk mainly arises from trade and other receivables as well as cash and bank balances of the Group.

Most of the Group’s cash and bank balances are held in major global financial institutions.

The Group has stringent policies in place to manage its credit risk with trade and other receivables, which include but are not

limited to the measures set out below:

(i) The Group selects customers in a cautious manner. Its credit control team has implemented a risk assessment system to

evaluate its customers’ financial strengths prior to agreeing at the trade terms with individual customers. It is not uncommon

that the Group requires securities (such as standby or commercial letter of credit, or bank guarantee) from a small number of

its customers that fall short of the required minimum score under its Risk Assessment System;

(ii) A significant portion of trade receivable balances are covered by trade credit insurance or factored to external financial

institutions on a non-recourse basis;

(iii) It has in place a close monitoring system with a dedicated team to ensure on-time recoveries from its trade debtors; and

(iv) Internally it has set up rigid policies on provision made for both inventories and receivables to motivate its business managers

to step up efforts in these two areas so as to avoid any significant impact on their financial performance.

The Group’s five largest customers of the Continuing Operations, in aggregate, account for 36% of the Continuing Operation’s

business. Transactions with these customers are entered into within the credit limits designated by the Group.

Except for trade receivables of US$35,252,000 (2014: US$22,556,000) and other receivables of US$11,316,000 (2014: US$29,401,000),

which were considered impaired and fully provided, none of the other financial assets including available-for-sale financial assets

(Note 16), due from related companies (Note 18) and other receivables and deposits (Note 20) are considered impaired as there

is no recent history of default of the counterparties. The maximum exposure of these other financial assets to credit risk at the

reporting date is their carrying amounts.



36 Financial Risk Management (continued)

(c) Liquidity RiskPrudent liquidity risk management implies maintaining sufficient cash on hand and the availability of funding through an adequate

amount of committed credit facilities from the Group’s bankers.

Management monitors rolling forecasts of the Group’s liquidity reserves (comprises undrawn borrowing facilities and cash and cash

equivalents (Note 21)) on the basis of expected cash flow.

The table below analyzes the liquidity impact of the Group’s non-derivative financial liabilities (including annual coupons payable for

the long-term notes) into relevant maturity groupings based on the remaining period from the balance sheet date to the contractual

maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. These amounts will not reconcile to

the amounts disclosed on the consolidated balance sheet and in Note 27 for long-term liabilities.

Less than 1 year

Between 1 and 2 years

Between 2 and 5 years

Over 5 years

US$’000 US$’000 US$’000 US$’000

At 31 December 2015

Long-term bank loans – 100,000 – –

Purchase consideration payable for acquisitions 87,433 70,271 94,538 –

Long-term notes – unsecured 66,875 553,125 848,438 –

Trade and bills payable 2,464,785 – – –

Accrued charges and sundry payables 601,129 – – –

Financial guarantee contract 750 – – –

Due to related companies 1,038 – – –

Bank advances for discounted bills 33,681 – – –

Short-term bank loans 95,819 – – –

At 31 December 2014

Long-term bank loans – 17,000 – –

Purchase consideration payable for acquisitions 134,661 89,145 250,177 –

Long-term notes – unsecured 66,875 66,875 631,875 769,688

Trade and bills payable 2,561,172 – – –

Accrued charges and sundry payables 692,427 – – –

Financial guarantee contract 750 – – –

Due to related companies 48 – – –

Bank advances for discounted bills 33,834 – – –

Short-term bank loans 162,850 – – –

All of the Group’s gross settled derivative financial instruments are in hedge relationships and are due to settle within 12 months of

the balance sheet date. These contracts require undiscounted contractual cash inflows of US$212,734,000 (2014: US$205,935,000)

and undiscounted contractual cash outflows of US$208,742,000 (2014: US$194,893,000).



37 Capital Risk ManagementThe Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to

provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost

of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return

capital to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net

debt divided by total capital. Net debt is calculated as total borrowings (including short-term bank loans (Note 23), long-term bank

loans (Note 23) and long-term notes (Note 27) less cash and cash equivalents (Note 21)). Total capital is calculated as total equity,

as shown in the consolidated balance sheet, plus net debt.

The Group’s strategy is to maintain a gearing ratio not exceeding 35%. The gearing ratios at 31 December 2015 and 2014 were

as follows:

2015 2014US$’000 US$’000

Long-term bank loans (Note 23) 100,000 17,000

Short-term bank loans (Note 23) 95,819 162,850

Long-term notes (Note 27) 1,253,823 1,254,369

1,449,642 1,434,219

Less: Cash and cash equivalents (Note 21) (342,243) (538,529)

Net debt 1,107,399 895,690

Total equity 3,010,166 3,110,078

Total capital 4,117,565 4,005,768

Gearing ratio 27% 22%



38 Fair Value EstimationThe table below analyses financial instruments carried at fair value, by valuation method. The different levels have been

defined as follows:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as

prices) or indirectly (that is, derived from prices) (level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The following table presents the Group’s assets and liabilities that are measured at fair value at 31 December 2015.

Level 1 Level 2 Level 3 TotalUS$’000 US$’000 US$’000 US$’000

Assets

Available-for-sale financial assets (Note 16)

– Club debentures – – 3,854 3,854

Derivative financial instrument used for hedging (Note 19) – 4,272 – 4,272

Total Assets – 4,272 3,854 8,126

Liabilities

Purchase consideration payable for acquisitions – – 242,502 242,502

Total Liabilities – – 242,502 242,502

The following table presents the Group’s assets and liabilities that are measured at fair value at 31 December 2014.

Level 1 Level 2 Level 3 TotalUS$’000 US$’000 US$’000 US$’000

Assets

Available-for-sale financial assets (Note 16)

– Club debentures – – 3,709 3,709

Derivative financial instrument used for hedging (Note 19) – 11,323 – 11,323

Total Assets – 11,323 3,709 15,032

Liabilities

Purchase consideration payable for acquisitions – – 458,080 458,080

Total Liabilities – – 458,080 458,080



38 Fair Value Estimation (continued)

The fair values of financial instruments traded in active markets are based on quoted market prices at the balance sheet date. A

market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group,

pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s

length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are

included in level 1.

The fair values of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) are

determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is

available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are

observable, the instrument is included in level 2.

If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

Specific valuation techniques used to value financial instruments include:

• Quoted market prices or dealer quotes for similar instruments.

• The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with

the resulting value discounted back to present value.

• Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments.

There were no significant transfer of assets between level 1, level 2 and level 3 fair value hierarchy classifications during the year.

The following summarizes the major methods and assumptions used in estimating the fair values of the significant assets and

liabilities classified as level 2 or 3 and the valuation process for assets and liabilities classified as level 3:

DERIVATIVE FINANCIAL INSTRUMENTS USED FOR HEDGING

The Group relies on bank valuations to determine the fair value of financial assets/liabilities which in turn are determined using

discounted cash flow analysis. These valuations maximize the use of observable market data. Foreign currency exchange prices are

the key observable inputs in the valuation.

PURCHASE CONSIDERATION PAYABLE FOR ACQUISITIONS

The Group recognizes the fair value of those purchase considerations for acquisitions, as of their respective acquisition dates as

part of the consideration transferred in exchange for the acquired businesses. These fair value measurements require, among

other things, significant estimation of post-acquisition performance of the acquired businesses and significant judgment on time

value of money. These calculations use cash flow projections for post-acquisition performance. The discount rate used is based on

the prevailing incremental cost of borrowings of the Group from time to time ranging from 1.0% to 2.5%.



38 Fair Value Estimation (continued)

The following table presents the changes in level 3 instruments for the year ended 31 December 2015 and 2014.

2015 2014

Purchase Consideration

Payable for Acquisitions Others

Purchase Consideration

Payable for Acquisitions Others

US$’000 US$’000 US$’000 US$’000

Opening balance 458,080 3,709 1,397,999 6,333


Fair value gains – 126 – 40

Additions – – 76,609 –

Settlement (102,268) – (210,766) –

Remeasurement of contingent consideration payable (116,973) – (176,007) –

Others 3,663 19 9,372 –


Additions – – 60,227 –

Settlement – – (69,306) –

Remeasurement of contingent consideration payable – – (19,667) –

Others – – 18,464 –

Distribution in specie – – (628,845) (2,664)

Closing balance 242,502 3,854 458,080 3,709

Total gain for the year included in profit or

loss of Continuing Operations (116,973) – (176,007) –



39 Balance Sheet and Reserve Movement of the Company

Balance Sheet of the Company



Non-current Assets

Interests in subsidiaries 1,339,604 1,339,604

Current Assets

Due from subsidiaries 4,182,044 4,327,309

Other receivables, prepayments and deposits 139 499

Cash and bank balances 5,808 1,439

4,187,991 4,329,247

Current Liabilities

Accrued charges and sundry payables 9,464 9,457

9,464 9,457

Net Current Assets 4,178,527 4,319,790

Total Assets Less Current Liabilities 5,518,131 5,659,394

Financed by:

Share capital 13,487 13,398

Reserves (a) 3,747,821 3,888,627

Shareholders’ funds 3,761,308 3,902,025


Total Equity 4,264,308 4,405,025

Non-current Liabilities

Long-term notes 1,253,823 1,254,369

5,518,131 5,659,394

William Fung Kwok Lun Spencer Theodore Fung

Group Chairman Group Chief Executive Officer



39 Balance Sheet and Reserve Movement of the Company (continued)

(a) Reserve Movement of the Company

Share Premium

Treasury Share


Employee Share-based



US$’000 US$’000 US$’000 US$’000 US$’000 US$’000(Note 25 (iii)) (Note (i))

Balance at 1 January 2015 699,476 (6,739) 974,189 37,049 2,184,652 3,888,627

Profit for the year – – – – 287,309 287,309

Issue of shares for Share Award

Scheme – (89) – – – (89)

Purchase of shares for Share Award

Scheme – (7,300) – – – (7,300)

Employee Share Option and

Share Award Scheme:

– value of employee services – – – 23,583 – 23,583

– vesting of shares for Share Award

Scheme 5,142 828 – (5,970) – –

2014 final and special dividend paid – – – – (303,388) (303,388)

2015 interim dividend paid – – – – (140,921) (140,921)

Balance at 31 December 2015 704,618 (13,300) 974,189 54,662 2,027,652 3,747,821

Balance at 1 January 2014 3,699,476 (6,739) 264,189 36,821 566,889 4,560,636

Profit for the year – – – – 2,124,700 2,124,700


– value of employee services – – – 228 – 228

Share premium reduction (3,000,000) – 3,000,000 – – –

2013 final dividend paid – – – – (366,779) (366,779)

2014 interim dividend paid – – – – (140,158) (140,158)

Distribution in specie – – (2,290,000) – – (2,290,000)

Balance at 31 December 2014 699,476 (6,739) 974,189 37,049 2,184,652 3,888,627

NOTE:(i) The contribution surplus of the Company represents:

(1) The difference between the nominal value of the Company’s shares issued in exchange for the issued ordinary shares of Li & Fung (B.V.I.) Limited and the value of net

assets of the underlying subsidiaries acquired as at 2 June 1992 amounting to US$14,232,000. At Group level, the amount is reclassified into its components of reserves

of the underlying subsidiaries.

(2) The difference between the issue price and the nominal value of the Company’s shares issued in connection with the acquisition of Colby in 2000 amounting to

US$249,957,000. At Group level, the amount is set off against goodwill arising from the acquisition.

(3) During 2014, US$3,000,000,000 contributed surplus was created by reduction of the share premium of the Company. Contributed surplus of US$2,290,000,000 was then

distributed as a result of the spin-off of Global Brands Group.



40 Benefits and Interests of Directors (Disclosures Required by Section 383 of the Hong Kong Companies Ordinance (Cap. 622), Companies (Disclosure of Information about Benefits of Directors) Regulation (Cap. 622G) and HK Listing Rules)

(a) Directors’ and Chief Executive’s EmolumentsThe remuneration of every director and the chief executive is set out below:

For the year ended 31 December 2015:

Emoluments Paid or Receivable in Respect of a Person’s Services as a Director, Whether of the Company or its Subsidiary Undertaking:

Emoluments Paid or

Receivable in respect of

Director’s Other Services in Connection

with the Management of the Affairs

of the Company or its Subsidiary

Undertaking Total

Name of Director Fees SalaryDiscretionary

BonusesHousing

Allowance

Share Options/

Award Shares Gain

Estimated Money

Value of Other Benefits

Employer’s Contribution to

a Retirement Benefit

Scheme

Remunerations Paid or


Accepting Office as Director

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000(Note (i)) (Note (v)) (Note (ii))

Executive Directors

William Fung Kwok Lun 39 618 2,358 – – – – – – 3,015

Spencer Theodore Fung 39 703 2,331 – 61 – 2 – – 3,136

Marc Robert Compagnon 39 639 3,143 – 52 43 2 – – 3,918

Non-executive Directors

Victor Fung Kwok King 61 – – – – – – – – 61

Paul Edward Selway-Swift 64 – – – – – – – – 64

Allan Wong Chi Yun 71 – – – – – – – – 71

Franklin Warren McFarlan

(Note (iv)) 27 – – – – – – – – 27

Martin Tang Yue Nien 64 – – – – – – – – 64

Margaret

Leung Ko May Yee 64 – – – – – – – – 64

NOTES:(i) The discretionary bonuses paid in 2015 were in relation to performance and services for 2014.

(ii) Other benefits include mortgage interest subsidy and club membership.

(iii) During the year, no Share (2014: Nil) was issued to any directors of the Company under the 2003 Option Scheme and 2014 Option Scheme.

(iv) Retired as Independent Non-executive Director of the Company with effect from 21 May 2015.

(v) Share Options/Award Shares gain is determined based on the market price at the exercise/vesting date.



40 Benefits and Interests of Directors (Disclosures Required by Section 383 of the Hong Kong Companies Ordinance (Cap. 622), Companies (Disclosure of Information about Benefits of Directors) Regulation (Cap. 622G) and HK Listing Rules) (continued)

(a) Directors’ and Chief Executive’s Emoluments (continued)

For the year ended 31 December 2014:

Emoluments Paid or Receivable in Respect of a Person’s Services as a Director, Whether of the Company or its Subsidiary Undertaking:

Emoluments Paid or


Director’s Other Services in Connection

with the Management of the Affairs

of the Company or its Subsidiary

Undertaking Total

Name of Director Fees SalaryDiscretionary

BonusesHousing

Allowance

Share Options/

Award Shares Gain

Estimated Money

Value of Other Benefits

Employer’s Contribution to

a Retirement Benefit

Scheme

Remunerations Paid or


Accepting Office as Director

US$’000 US$’000 US $’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000(Note (i)) (Note (ii))

Executive Directors

William Fung Kwok Lun 39 616 2,512 – – – 2 – – 3,169

Bruce Philip Rockowitz

(Note (iii)) 20 282 5,557 – – 14 1 – – 5,874

Spencer Theodore Fung 39 648 1,058 – – – 2 – – 1,747


(Note (iv)) 20 600 4,045 – – 46 2 – – 4,713

Non-executive Directors

Victor Fung Kwok King 65 – – – – – – – – 65

Paul Edward Selway-Swift 69 – – – – – – – – 69

Allan Wong Chi Yun 68 – – – – – – – – 68

Franklin Warren McFarlan 64 – – – – – – – – 64

Martin Tang Yue Nien 64 – – – – – – – – 64

Benedict Chang Yew Teck

(Note (v)) 16 – – – – – – – – 16

Fu Yuning (Note (vi)) 58 – – – – – – – – 58

Margaret

Leung Ko May Yee 59 – – – – – – – – 59




(a) Directors’ and Chief Executive’s Emoluments (continued)

For the year ended 31 December 2014: (continued)

NOTES:(i) The discretionary bonuses paid in 2014 were in relation to performance and services for 2013.

(ii) Other benefits include mortgage interest subsidy and club membership.

(iii) Resigned as Executive Director of the Company with effect from 1 July 2014.

(iv) Appointed as Executive Director of the Company with effect from 1 July 2014.

(v) Retired as Non-executive Director of the Company with effect from 15 May 2014.

(vi) Resigned as Independent Non-executive Director of the Company with effect from 31 December 2014.

As at 31 December 2015, certain Directors held the following Share Options to acquire Shares of the Company:

No. of Share Options Exercise Price Exercisable Period

16,000,000 (2014: 18,000,000) HK$12.121 Exercisable in eight equal tranches during the period

from 1/5/2014 to 30/4/2023 with each tranche having an

exercisable period of two years

16,023,000 (2014: Nil) HK$7.49 Exercisable in three equal tranches during the period

from 1/1/2016 to 31/12/2019 with each tranche having an

exercisable period of two years

NOTE:(1) Following the spin-off and separate listing of Global Brands, the exercise price applicable to the Share Options outstanding on the record date for the distribution in specie

(i.e. 7 July 2014) was adjusted from HK$14.50 to HK$12.12 with effect from 31 August 2014.

The closing market price of the Shares as at 31 December 2015 was HK$5.27.




(b) Directors’ Termination BenefitsNo termination benefits was provided to or receivable by any director during the year as compensation for the early termination of

appointment (2014: None).

(c) Consideration Provided to Third Parties for Making Available Directors’ ServicesNo consideration was provided to or receivable by third parties for making available directors’ services (2014: None).

(d) Information about Loans, Quasi-loans and Other Dealings in Favour of Directors, Controlled Bodies Corporate by and Connected Entities with Such DirectorsThere are no loans, quasi-loans or other dealings in favour of directors, their controlled bodies corporate and connected entities

(2014: None).

(e) Directors’ Material Interests in Transactions, Arrangements or ContractsNo significant transactions, arrangements and contracts in relation to the Group’s business to which the Company was a party and

in which a director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any

time during the year.

41 Approval of Financial StatementsThe financial statements were approved by the Board of Directors on 17 March 2016.



42 Principal Subsidiaries, Associated Companies and Joint Venture

Place of Incorporation and Operation

Issued and Fully Paid Share Capital

Percentage of Equity Held by the Company Principal Activities

Note Principal Subsidiaries

Held Directly

(2) Integrated Distribution Services Group Limited

Bermuda Ordinary US$12,000 100 Investment holding

(2) LF Centennial Limited British Virgin Islands Ordinary US$50,000 100 Investment holding

(2) LF Credit Limited Bermuda Ordinary US$12,000 100 Investment holding

(1) Li & Fung (B.V.I.) Limited British Virgin Islands Ordinary US$400,010 100 Marketing services and investment holding

Held Indirectly

888 UK Limited England Ordinary GBP100 100 Service company

(2) AGI Logistics Foreign Holdings LLC U.S.A. Capital contribution US$1 100 Investment holding

Algreta Solutions Limited England Ordinary GBP10,527 100 Sale and distribution of security products

(2) Appleton Holdings Ltd. British Virgin Islands Ordinary US$1 100 Investment holding

B.G.S. Limited Thailand Ordinary Baht 288,000 Preference Baht 712,000

100 Marketing and distribution of healthcare products

Black Cat Fireworks Limited England Ordinary GBP15,500,000 100 Wholesaling

(2) Bond Medical Company Limited Macau MOP$100,000 100 Distribution of medical and pharmaceutical products and medical equipment

Bossini Fashion GmbH Germany EUR468,000 100 Importer

BS Direct Limited Hong Kong Ordinary HK$2 100 Export trading

C Group US LLC U.S.A. Capital contribution US$1,000 100 Marketing services

Camberley Enterprises Limited Hong Kong Ordinary HK$250,000 100 Manufacturing and trading

Camberley Trading Service (Shenzhen) Limited

The People’s Republic of China

RMB1,500,000 100 foreign-owned

enterprise

Export trading services

(2) Catalyst Direct Sarl France Ordinary EUR10,000 100 Wholesaling

(2) Catalyst Tags Inc. U.S.A. Common stock US$10,000 100 Distribution

(2) Centennial (Luxembourg) S.a.r.l. Luxembourg EUR8,931,250 100 Investment holding

Character Direct Limited Hong Kong Ordinary HK$2 100 Design and marketing

Chuan Jui Chuan Logistics Co., Ltd. Taiwan NT$25,000,000 100 Transportation

Chuan Jui Fu Logistics Co., Ltd. Taiwan NT$25,000,000 100 Transportation

(2) Colby Group Holdings Limited British Virgin Islands Ordinary US$45,000 100 Investment holding

(2) Colby Property Holdings Limited British Virgin Islands Ordinary US$1 100 Investment holding

Comet Feuerwerk GmbH Germany EUR1,000,000 100 Fireworks wholesaling

Concept 3 Limited Hong Kong Ordinary HK$2 100 Investment holding

(2) Covo Design (Dongguan) Co., Ltd. The People’s Republic of China

US$4,000,000 100 foreign-owned

enterprise

Sample production and export trading services







(2) Crimzon Rose Accessories (Shenzhen) Co. Ltd.


HK$1,500,000 100 foreign-owned

enterprise

Wholesaling

Definitive Sourcing (India) Private Limited

India Rs100,000 100 Buying services for sourcing goods

(2) Direct Sourcing Group Holdings Limited

British Virgin Islands Ordinary US$1 100 Investment holding

(2) Direct Sourcing Group Investment Limited

British Virgin Islands Ordinary US$1 100 Investment holding

Direct Sourcing Group Pte. Ltd. Singapore Ordinary S$10,000 100 Export trading

Dodwell (Mauritius) Limited Hong Kong Ordinary “A” HK$300,000 Ordinary “B” HK$200,000

60 Export trading

Dodwell (Singapore) Pte. Ltd. Singapore Ordinary S$200,000 100 Export trading

(2) Dongguan LF Beauty Manufacturing Services Limited



enterprise

Trading and manufacturing

(2) Dongguan LF Products Trading Limited



enterprise

Sample design and export trading services

(2) DSG (Bangladesh) Limited Bangladesh Ordinary TK$3,750,000 100 Export trading services

DSG (Hong Kong) Limited Hong Kong Ordinary HK$1 100 Export trading services

DSG (Shenzhen) Limited The People’s Republic of China


enterprise


(2) DSG (US) Inc. U.S.A. Common stock US$1 100 Sourcing service

DSG Services Pte. Ltd. Singapore Ordinary S$10,000 100 Export trading services

(2) Empire Knight Group Limited British Virgin Islands Ordinary US$1 100 Property investment

(2) Far East Logistics (Shenzhen) Co. Ltd.



enterprise

Wholesaling

Fenix Fashion Limited Hong Kong Ordinary HK$1 100 General trading of merchandise

(2) Fleet Company Limited Macau MOP$100,000 100 Distribution of medical and pharmaceutical products and medical equipment

Four Star Company Limited Macau MOP$100,000 100 Distribution of medical and pharmaceutical products and medical equipment

42 Principal Subsidiaries, Associated Companies and Joint Venture (continued)







(2) Four Star Construction and Engineering Company Limited

Macau MOP$25,000 100 Distribution of medical and pharmaceutical products and medical equipment

(2) GB Apparel Limited England Ordinary GBP1,000 100 Investment holding

GMR (Hong Kong) Limited Hong Kong Ordinary HK$2 100 Export trading

(2) Golden Gate Fireworks Inc. U.S.A. Common stock US$600,000 100 Commission agent and investment holding

Golden Horn N.V. Curacao US$6,100 100 Investment holding

Goodwest Enterprises Limited Hong Kong Ordinary HK$2 100 Export trading

GSCM (HK) Limited Hong Kong Ordinary HK$140,000 100 Export trading

GSCM LLC U.S.A. Capital contribution US$1 100 Trading of apparel

Hanson Im-und Export GmbH Germany EUR26,000 100 Wholesaling

(2) Homeworks (Europe) B.V. The Netherlands Ordinary EUR18,000 100 Export trading

Homeworks Asia Limited Hong Kong Ordinary HK$2 100 Export trading

HTL Fashion (UK) Limited England Ordinary GBP1 100 Design and export trading

HTL Fashion Hazir Giyim Sanayi ve Ticaret Limited Sirketi

Turkey YTL25,000 100 Manufacturing

HTP Fashion Limited Hong Kong Ordinary HK$1 100 Manufacturing and trading

(2) Icare Health Care Company Ltd. Macau MOP$100,000 100 Distribution of medical and pharmaceutical products and medical equipment

IDS Corporate Services (S) Pte. Ltd. Singapore Ordinary S$24,700 100 Investment holding, distribution and provision of services including management services

(2) IDS Group Limited British Virgin Islands Ordinary US$949,165 100 Investment holding

(2) IDS International (Shanghai) Co., Ltd. The People’s Republic of China


enterprise

Freight forwarders and other logistics services

(2) IDS International USA Inc. U.S.A. Common stock US$1 100 Logistics and supply chain management

IDS Manufacturing Sdn. Bhd. Malaysia Ordinary RM23,000,000 100 Manufacturing of pharmaceutical, foods and toiletries products

Imagine POS Limited Hong Kong Ordinary “A” HK$2,000,000 Ordinary “B” HK$757,471

100 Export trading








Imagine POS UK Limited England Ordinary GBP100 100 Cosmetic estate management services

International Sources Trading Limited Hong Kong Ordinary HK$2 100 Export trading

Jackel Cosmetics Limited Hong Kong Class “A” HK$9,950,645 Class “B” non-voting HK$13,890

100 Export trading

(2) Jackel France SAS France Ordinary EUR37,500 100 Export trading

Jackel International (Asia) Limited Hong Kong Ordinary “A” HK$346,500 Ordinary “B” HK$86,850

100 Export trading

(2) Jackel International Europe SAS France Ordinary EUR105,000 100 Export trading

Jackel, Inc. U.S.A. Class “A” voting common stock US$1 Class “B” non-voting common stock US$99

100 Export trading

JDH Marketing (Thailand) Limited Thailand Ordinary Baht 210,000,000 100 Marketing and distribution of healthcare products

JV Cosmetics Company Limited Hong Kong Ordinary HK$1,000,000 100 Export trading

Kariya Industries Limited Hong Kong Ordinary HK$1,000,000 100 Manufacturing and trading

Lenci Calzature SpA Italy Equity shares EUR206,400 100 Design, marketing and sourcing

LF (Philippines), Inc. The Philippines Common shares Pesos 21,000,000 100 Distribution of consumer products and provision of logistics services

(2) LF Asia (Borneo) Sdn Bhd Brunei Darussalam Ordinary B$3,000,000 70 General merchandising, shipping and insurance agency

LF Asia (Hong Kong) Limited Hong Kong Ordinary HK$146,000,000 100 Distribution of consumer and pharmaceutical products

LF Asia (Malaysia) Sdn. Bhd. Malaysia Ordinary RM14,231,002 100 Distribution of consumer and pharmaceutical products

(2) LF Asia (Philippines), Inc. The Philippines Common shares Peso 11,983,140 100 Distribution and logistics

LF Asia (Singapore) Pte. Ltd. Singapore Ordinary S$300,000 Preference S$68,000

100 Distribution of healthcare products

LF Asia (Thailand) Limited Thailand Ordinary Baht 16,000,000 Preference Baht 5,500,000 25% paid up

100 Distribution of consumer and pharmaceutical products

LF Asia Distribution (Taiwan) Limited Hong Kong Ordinary HK$1 100 Distribution of consumer products

LF Asia Management Limited Hong Kong Ordinary HK$10,000 100 Provision of management and consultancy services

LF Asia Marketing (Malaysia) Sdn. Bhd. Malaysia Ordinary RM1,000,000 100 Distribution of consumer products








(2) LF Asia Sebor (Sabah) Holdings Sdn. Bhd.

Malaysia Ordinary RM11,000,000 60 Investment holding, provision of management and warehousing services

(2) LF Asia Sebor (Sabah) Sdn. Bhd. Malaysia Ordinary RM9,850,000 60 Distribution of consumer products

(2) LF Asia Sebor (Sarawak) Holdings Sdn. Bhd.

Malaysia Ordinary RM9,503,333 67.09 Investment holding, provision of management and warehousing services

(2) LF Asia Sebor (Sarawak) Sdn. Bhd. Malaysia Ordinary RM5,000,000 67.09 Distribution of consumer products

(2) LF Beauty (Shenzhen) Limited The People’s Republic of China


enterprise


LF Beauty (Thailand) Ltd. (formerly known as IDS Manufacturing Limited)

Thailand Ordinary Baht 469,500,000 100 Manufacturing of household, pharmaceutical and personal care products

LF Beauty (UK) Limited England Ordinary GBP100 100 Design, marketing and manufacturing

LF Beauty Inc. U.S.A. Common stock US$1 100 Investment holding

LF Beauty Limited Hong Kong Ordinary HK$1 100 Export trading

(2) LF Beauty Manufacturing China Co. Ltd (formerly known as JV Cosmetics (Dongguan) Co. Ltd.)



enterprise

Manufacturing and trading

LF Centennial Pte. Ltd. Singapore Ordinary S$100,000 100 Export trading services

LF Centennial Services (Hong Kong) Limited

Hong Kong Ordinary HK$1 100 Export trading services

(2) LF Corporate Capital (I) Limited British Virgin Islands Ordinary US$1 100 Investment holding

LF Credit Pte. Ltd. Singapore Ordinary S$1,000,000 100 Provision of trade-related credit services

LF Distribution Holding Inc. U.S.A. Common stock US$1 100 Investment holding

(2) LF Distribution Holding Limited British Virgin Islands Ordinary US$1 100 Investment holding

LF Distribution International Holding Limited

Hong Kong Ordinary US$1 100 Investment holding

LF Distribution International Inc. U.S.A. Common stock US$1 100 Investment holding

(2) LF Distribution Limited Bermuda Ordinary US$100 100 Investment holding

LF Europe (Germany) Services GmbH Germany EUR25,000 100 Provision of accounting services

LF Europe Limited England Ordinary GBP26,788,000 100 Investment holding

LF Fashion (Hong Kong) Limited Hong Kong Ordinary HK$1 100 Export trading services

LF Fashion Pte. Ltd. Singapore Ordinary S$10,000 100 Export trading








(2) LF Fashion Service Pte. Ltd. Singapore Ordinary S$10,000 100 Export trading

LF Freight (Hong Kong) Limited Hong Kong Ordinary HK$2 100 Provision of supply chain management services

LF Home Limited Hong Kong Ordinary HK$2 100 Export trading

(2) LF International Inc. U.S.A. Common stock US$30,002 100 Investment management

LF Logistics (Bangladesh) Limited Bangladesh Ordinary TK$10,000,000 100 Freight forwarding

LF Logistics (Cambodia) Limited Cambodia Ordinary Riels 20,000,000 100 Freight forwarding and other logistics services

LF Logistics (China) Co., Ltd. The People’s Republic of China


enterprise

Provision of Freight forwarders and other logistics services

(2) LF Logistics (Guangzhou) Co., Ltd. The People’s Republic of China


enterprise

Provision of Freight forwarders and other logistics services

LF Logistics (Hong Kong) Limited Hong Kong Ordinary HK$10,000 100 Provision of logistics services

(2) LF Logistics (India) Private Limited India Ordinary Rs15,000,000 100 Logistics, supply chain management and freight forwarding

LF Logistics (Taiwan) Limited Hong Kong Ordinary HK$200 100 Provision of logistics and packaging services

LF Logistics (Thailand) Limited Thailand Ordinary Baht 307,750,000 100 Provision of logistics services

LF Logistics (UK) Limited England Ordinary GBP50,000 100 Provision of logistics services

(2) LF Logistics Holding Limited British Virgin Islands Ordinary US$1 100 Investment holding

LF Logistics Holdings (UK) Limited England Ordinary GBP1 100 Investment holding

(2) LF Logistics Korea Limited Korea Common stock KRW300,000,000 100 Provision of logistics services

(2) LF Logistics Limited Bermuda Ordinary US$100 100 Investment holding

LF Logistics Management Limited Hong Kong Ordinary HK$2 100 Provision of management and consultancy services

(2) LF Logistics Pakistan (Private) Limited Pakistan Ordinary Rs5,000,000 100 Freight forwarders and other logistics services

LF Logistics Services (M) Sdn. Bhd. Malaysia Ordinary RM2,000,000 100 Provision of logistics services

LF Logistics Services Pte. Ltd. Singapore Ordinary S$28,296,962 100 Provision of logistics services

(2) LF Logistics USA LLC (formerly known as LF Freight (USA) LLC)

U.S.A. Capital contribution US$1 100 Freight forwarders and other logistics services

LF Men’s Group LLC U.S.A. Capital contribution US$1 100 Wholesaling

LF Performance Services Sdn. Bhd. Malaysia Ordinary RM250,000 70 House Royal Custom’s bonded warehouse licence

LF Products (Hong Kong) Limited Hong Kong Ordinary HK$1 100 Provision of management support services








LF Products (Shanghai) Limited The People’s Republic of China


enterprise

Export, import and domestics trading

LF Products Pte. Ltd. Singapore Ordinary S$10,000 100 Export trading

LF Sourcing (Millwork) LLC U.S.A. Capital contribution US$1 100 Sourcing and export trading

LF Sourcing Sportswear LLC U.S.A. Capital contribution US$1 100 Wholesaling

(2) Li & Fung (Australia) Proprietary Limited

Australia Ordinary AUD1 100 Marketing liaison

Li & Fung (Bangladesh) Limited Bangladesh Ordinary TK$9,500,000 100 Export trading services

(2) Li & Fung (Brasil) Trading, Importacao E Exportacao Ltda

Brazil Common shares R$333,559 100 Service provider

Li & Fung (Cambodia) Limited Cambodia Ordinary Riels 120,000,000 100 Export trading services

(2) Li & Fung (Chile) Limitada Chile Chilean Pesos $5,500,000 100 Export trading

Li & Fung (Europe) Holding Limited England Ordinary GBP100 100 Investment holding

Li & Fung (Exports) Limited Hong Kong Ordinary HK$10,000 Non-voting deferred HK$8,600,000

100 Investment holding

(2) Li & Fung (Guatemala) S.A. Guatemala Nominative shares Q5,000 100 Export trading services

(2) Li & Fung (Honduras) Limited Honduras Nominative common shares Lps25,000 100 Export trading services

Li & Fung (India) Private Limited India Equity shares Rs64,000,200 100 Export trading services

Li & Fung (Korea) Limited Korea Common stock KRW200,000,000 100 Export trading services

(2) Li & Fung (Mauritius) Limited Mauritius “A” Shares Rs750,000 “B” Shares Rs500,000

60 Export trading services

(2) Li & Fung (Morocco) SARL Morocco Ordinary Dirhams10,000 100 Export trading services

(2) Li & Fung (Nicaragua), Sociedad Anonima

Nicaragua Nominative shares C$50,000 100 Export trading

Li & Fung (Philippines) Inc. The Philippines Common shares Peso 1,000,000 100 Export trading services

(2) Li & Fung (Portugal) Limited England Ordinary GBP100 100 Investment holding

Li & Fung (Singapore) Private Limited Singapore Ordinary S$25,000 100 Export trading services

Li & Fung (Taiwan) Limited Taiwan NT$63,000,000 100 Sourcing and inspection

Li & Fung (Thailand) Limited Thailand Ordinary Baht 20,000,000 100 Export trading services

Li & Fung (Trading) Limited Hong Kong Ordinary HK$200 Non-voting deferred HK$10,000,000

100 Export trading services and investment holding

Li & Fung (Vietnam) Limited Vietnam Charter capital US$800,000 100 Export trading services

Li & Fung Agencia de Compras em Portugal, Limitada

Portugal EUR99,759.58 100 Export trading services








(2) Li & Fung Mexico S.A. de C.V. (formerly known as Direct SG Mexico Limited S.A. de C.V.)

Mexico Nominative common shares MXP150,000 100 Service and import trading

Li & Fung Mumessillik Pazarlama Limited Sirketi

Turkey YTL45,356,100 100 Export trading services

Li & Fung Pakistan (Private) Limited Pakistan Ordinary Rs10,000,000 100 Export trading services

Li & Fung South Africa (Proprietary) Limited

South Africa Ordinary Rand 100 100 Export trading services

Li & Fung Taiwan Holdings Limited Taiwan NT$287,996,000 100 Investment holding

Li & Fung Trading (China) Holding Limited (formerly known as Dana International Limited)

Hong Kong Ordinary HK$2 100 Investment holding

(2) Li & Fung Trading (Italia) S.r.l. Italy EUR100,000 100 Export trading services

Li & Fung Trading (Shanghai) Limited The People’s Republic of China


enterprise

Export trading

(2) Li & Fung Trading Service (Guangzhou) Limited



enterprise


Li & Fung Trading Service (Shanghai) Company Limited



enterprise


Li & Fung Trading Service (Shenzhen) Limited



enterprise


Lighthouse Asia Limited Hong Kong Ordinary HK$10,000 100 Investment holding

Lion Rock (Hong Kong) Limited Hong Kong Ordinary HK$10,000 100 Investment holding

Lion Rock Far East (1972) Limited Hong Kong Ordinary HK$20 100 Investment holding

Lion Rock International Trading & Co. Hong Kong Capital contribution HK$3,000,000 100 Provision of management services

Lion Rock Services (Far East) & Co. Hong Kong Capital contribution HK$17,000,000 100 Merchandising agent

Lion Rock Services (Switzerland) AG Switzerland CHF3,400,000 100 Export trading services

Lloyd Textile Trading Limited Hong Kong Ordinary HK$1,000,000 100 Manufacturing and trading

Lornamead Acquisitions Limited England Ordinary GBP1,000 100 Investment holding

Lornamead GmbH Germany EUR25,000 100 Manufacturing of perfumes and toilet preparations

Lornamead Group Limited England Ordinary GBP1,000 100 Investment holding

Lornamead Inc. U.S.A. Common stock US$26,824.8975 100 Wholesaling

Lornamead UK Limited England Ordinary GBP100 100 Manufacture of perfumes and toilet preparations

Material Sourcing (HK) Limited Hong Kong Ordinary HK$1 100 Export trading








(2) Mercury (BVI) Holdings Limited British Virgin Islands Ordinary US$1 100 Investment holding

Meredith Associates Limited Hong Kong Ordinary US$1,327,932 100 Investment holding

Mighty Hurricane Holdings Inc. U.S.A. Common stock of US$100 100 Wholesaling

Miles Fashion Asia Pte. Ltd. Singapore Ordinary S$1 100 Export trading

Miles GmbH (formerly known as Miles Fashion GmbH)

Germany EUR11,000,000 100 Importer

Miles Fashion Group France EURL France EUR10,000 100 Wholesaling

(2) Miles Fashion USA, Inc. U.S.A. Common stock US$1,000 100 Importer

Millwork Holdings Co., Inc. U.S.A. Common stock US$1 100 Investment holding

Modium Konfeksiyon Sanayi ve Ticaret Anonim Sirketi

Turkey A Shares YTL2,249,975 B Shares YTL25

100 Manufacturing

Nanjing LF Asia Company Limited The People’s Republic of China


enterprise

Importer, export trading and distribution of general merchandise

(2) New Star Instruments Limited Macau MOP$100,000 100 Distribution of medical and pharmaceutical products and medical equipment

Ningbo Zhicheng Customs Brokerage Co., Ltd.


RMB1,500,000 100foreign-owned

enterprise

Provision of customs brokerage services

P.T. Lifung Indonesia Indonesia Ordinary US$500,000 100 Export trading services

Paco Trading (International) Limited Hong Kong Ordinary HK$2 100 Export trading

PATCH Licensing LLC U.S.A. Capital contribution US$1 66.67 Export trading services

Perfect Trading Inc. Egypt LE2,480,000 60 Export trading services

Peter Black Footwear & Accessories Limited

England Ordinary GBP202,000 100 Design, marketing and sourcing

Peter Black Holdings Limited England Ordinary GBP0.25 100 Investment holding

Peter Black International Limited England Ordinary GBP0.01 100 Investment holding

Peter Black Overseas Holdings Limited

England Ordinary GBP2 100 Investment holding

Phil Henson GmbH Germany EUR50,000 100 Importer

Product Development Partners Limited

Hong Kong Ordinary HK$2 100 Export trading

PromOcean France SAS France EUR8,530,303 100 Wholesaling

PromOcean GmbH Germany EUR25,570 100 Wholesaling

PromOcean No 1 Limited England Ordinary GBP1 100 Investment holding

PromOcean Spain SL Spain EUR3,005.06 100 Wholesaling

PromOcean The Netherlands B.V. The Netherlands EUR39,379.5 100 Wholesaling

PromOcean UK Limited England Ordinary GBP1 100 Wholesaling








(2) PT Direct Sourcing Indonesia Indonesia Ordinary US$250,000 100 Export trading services

(2) PT. IDS Logistics Indonesia Indonesia Ordinary Rp1,820,400,000 100 Provision of logistics services

(2) PF. LF Asia Marketing Indonesia Indonesia Ordinary US$300,000 100 Import and distribution of cosmetics and personal care products

PT. LF Beauty Manufacturing Indonesia (formerly known as PT. LF Asia Manufacturing Indonesia)

Indonesia Ordinary Rp453,600,000 100 Manufacturing of personal care and household products

(2) PT. LF Services Indonesia Indonesia Ordinary Rp5,000,000,000 100 Logistics, transport and other services

Ralsey Group Ltd. U.S.A. Common stock US$1 100 Wholesaling

(2) Ratners Enterprises Ltd. British Virgin Islands Ordinary US$1 100 Investment holding

(2) Region Giant Holdings Limited British Virgin Islands Ordinary US$31 100 Investment holding

RMS Trading GmbH Germany Registered capital EUR25,000 100 General trading of merchandise

RT Sourcing (Shenzhen) Co. Ltd. The People’s Republic of China


enterprise


RT Sourcing Asia Limited Hong Kong Ordinary HK$102,000 100 Investment holding

Shanghai IDS Distribution Co., Ltd. The People’s Republic of China


enterprise

Storage and logistic transportation management

(2) Shanghai IDS Logistics Co., Ltd. The People’s Republic of China


enterprise

Provision of logistics services

Shanghai LF Asia Healthcare Co., Ltd. The People’s Republic of China


enterprise

Distribution of pharmaceutical products

(2) Shenzhen Catalyst Trading Co., Ltd. The People’s Republic of China

US$120,000 100 foreign-owned

enterprise

Security tag trading

Shiu Fung Fireworks Company Limited Hong Kong Ordinary “A” HK$1,100,000 Ordinary “B” HK$1,100,000

100 Export trading

Shiu Fung Fireworks Trading (Changsha) Limited



enterprise

Export trading

Silvereed (Hong Kong) Limited Hong Kong Ordinary HK$1 100 Export trading

(2) Simkar 2 Limited Cayman Islands Ordinary US$50,000 100 Investment holding

(2) Simkar Limited Cayman Islands Ordinary US$49,999.75 100 Investment holding

Sky Million International Limited Hong Kong Ordinary HK$2 100 Property investment








(2) STS Shenzhen Testing Service Limited The People’s Republic of China

US$660,000 100 foreign-owned

enterprise

Testing and technology consultation

(2) Tantallon Enterprises Limited British Virgin Islands Ordinary US$1 100 Investment holding

(2) Texnorte II – Industrias Texteis, Limitada

Portugal EUR5,000 100 Export trading services

Texnorte Industrial Limited Hong Kong Ordinary HK$2 100 Export trading

Toy Island (USA) LLC U.S.A. Capital contribution US$100 100 Marketing

Uncle Sam Online Vertriebs-und Vermarktungsrechte GmbH

Germany EUR26,000 100 Wholesaling

Ventana Bekleidungsfabrikation GmbH Germany EUR26,000 100 Wholesaling

Visage Group Limited England Ordinary GBP100,000 100 Investment holding

Visage Holdings (2010) Limited England Ordinary GBP2 100 Investment holding

Visage Holdings Limited England Ordinary GBP35,163 100 Investment holding

Visage Limited England Ordinary GBP54,100 100 Design, marketing and sourcing

W S Trading Limited Hong Kong Ordinary HK$1,000,000 100 Export trading

(2) Welmed (Macau) Company Limited Macau MOP$25,000 100 Distribution of medical and pharmaceutical products and medical equipment

Whalen Limited Hong Kong Ordinary HK$62,000,000 100 Design and marketing

Whalen LLC U.S.A. Capital contribution US$1 100 Wholesaling

Wilson Textile Limited Hong Kong Ordinary HK$1 100 Export trading

NOTES:(1) Li & Fung (B.V.I.) Limited provides the subsidiaries with promotional and marketing services outside Hong Kong.

(2) Subsidiaries not audited by PricewaterhouseCoopers. The aggregate net assets of subsidiaries not audited/reviewed by PricewaterhouseCoopers amounted to less than 5% of the

Group’s total net assets.





The above table lists out the principal subsidiaries of the Company as at 31 December 2015 which, in the opinion of the directors,

principally affected the results for the year or form a substantial portion of the net assets of the Group. To give details of other

subsidiaries would, in the opinion of the directors, result in particulars of excessive length.



Percentage of Equity Indirectly

Held by the Company Principal Activities

Note Principal Associated Companies

Blue Work Trading Company Limited Hong Kong Ordinary HK$4,000,000 50 Export trading# Fireworks Management, Inc. U.S.A. Common stock US$60,000 25 Investment holding# Gulf Coast Fireworks Sales, LLC U.S.A. Capital contribution US$2,909,051 30 Fireworks distribution# Marshall Fireworks, Inc. U.S.A. Common stock US$10,000 30 Convenience and store# Ningbo Penavico-CCL International

Freight Forwarding Co., Ltd.

The People’s

Republic of China

US$1,000,000 40 Provision of freight

forwarding services# Winco Fireworks International, LLC U.S.A. Capital contribution US$9,753,776 30 Wholesaling# Winco Fireworks Mississippi, LLC U.S.A. Capital contribution US$177,421 30 Wholesaling# Winco of Tennessee, LLC U.S.A. Capital contribution US$364,550 30 Fireworks wholesaling

and retailing

Note Principal Joint Venture* Red Sun Company Limited The People’s

Republic of China

RMB48,000,000 20 Domestic and

export trading

# The associated companies are not audited by PricewaterhouseCoopers.

* The joint venture is not audited by PricewaterhouseCoopers.

Although the Group owns less than half of the equity interests in Red Sun Company Limited, it is able to exercise joint control by virtue

of an agreement with other investors.

The above table lists out the principal associated companies and joint venture of the Company as at 31 December 2015 which, in the

opinion of the directors, principally affected the results for the year or form a substantial portion of the net assets of the Group. To give

details of other associated companies would, in the opinion of the directors, result in particulars of excessive length.

Ten-year financial summary


Consolidated Profit and Loss Account

2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

(Restated)

Turnover 18,830,835 19,288,499 19,025,512 20,221,806 20,030,271 15,912,201 13,394,741 14,195,143 11,853,840 8,719,264

Core Operating Profit 512,424 604,143 737,094 511,173 882,056 725,138 511,552 395,392 408,539 300,542

Operating Profit 594,985 723,625 811,726 790,703 879,937 679,318 497,373 390,310 461,545 309,272

Interest income 9,761 6,984 9,177 20,385 19,490 13,567 11,636 14,455 26,691 12,627

Interest expenses (99,541) (105,179) (107,575) (135,109) (128,594) (98,443) (47,706) (61,561) (64,059) (18,983)

Share of profits less losses of associated companies 1,570 1,373 442 638 1,231 1,850 998 794 634 1,359

Profit before taxation 506,775 626,803 713,770 676,617 772,064 596,292 462,301 343,998 424,811 304,275

Taxation (57,890) (59,035) (72,011) (54,053) (90,660) (47,525) (30,798) (33,269) (32,379) (22,011)

Profit/(loss) for the year

Continuing Operations (Note 1) 448,885 567,768 641,759

Discontinued Operations (Note 1) – (98,122) 113,528

Net profit for the year 448,885 469,646 755,287 622,564 681,404 548,767 431,503 310,729 392,432 282,264

Attributable to:

Shareholders of the Company 421,046 441,276 725,337 617,416 681,229 548,491 431,937 310,505 392,312 282,284

Holders of perpetual capital securities 30,000 30,000 30,000 4,415 – – – – – –

Non-controlling interests (2,161) (1,630) (50) 733 175 276 (434) 224 120 (20)

448,885 469,646 755,287 622,564 681,404 548,767 431,503 310,729 392,432 282,264

Earnings per Share (HK cents) (Note 2)

Basic 39.1 50.3(3) 57.1(3) 58.1 65.8 55.9 45.5 34.6 44.8 33.5

equivalent to (US cents) 5.04 6.46(3) 7.32(3) 7.45 8.43 7.17 5.83 4.44 5.74 4.30

Dividend per Share (HK cents) (Note 4) 28.0 34.0 41.5(4) 31.0 53.0 45.0 37.5 28.5 35.5 27.5

equivalent to (US cents) 3.61 4.36 5.32(4) 3.97 6.79 5.77 4.81 3.65 4.55 3.53

Special Dividend per Share (HK cents) – 7.0 – – – – – – – –

equivalent to (US cents) – 0.90 – – – – – – – –

NOTES:(1) The spin-off of Global Brands Group was completed on 8 July 2014. The financial results for the Global Brands Group for the period ended 8 July 2014 were presented as loss from

Discontinued Operations on net basis. Comparatives for the year ended 31 December 2013 have been restated accordingly. The financial results prior to 2013 have not been

restated.

(2) Adjusted for the effect of 1-for-10 Bonus Issue in May 2006 and Share Subdivision in May 2011.

(3) Based on earnings of Continuing Operations of the Group.

(4) Restated 2013 dividend per share based on pro rata share of core operating profit for Li & Fung excluding Global Brands Group. Actual 2013 interim and final year dividend

per share with Global Brands Group on a consolidated basis were 15 HK cents and 34 HK cents, respectively.


Ten-year financial summary (continued)

Consolidated Balance Sheet

2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

Intangible assets 4,266,863 4,349,083 7,608,556 7,058,406 6,525,999 4,882,166 2,333,657 1,872,068 1,458,287 604,252

Property, plant and equipment 241,626 244,907 439,599 418,624 325,432 309,186 160,988 164,495 144,872 142,868

Other non-current assets 78,923 58,160 119,558 160,930 120,195 127,456 115,133 23,023 30,751 115,943

Current assets 3,345,687 3,824,872 4,297,740 4,379,969 3,951,571 4,177,788 2,757,963 2,752,051 2,444,428 1,966,007

Current liabilities 3,339,181 3,701,518 4,082,124 3,873,938 3,664,820 3,317,362 2,227,923 2,288,234 2,095,649 1,658,606

Net current assets 6,506 123,354 215,616 506,031 286,751 860,426 530,040 463,817 348,779 307,401

4,593,918 4,775,504 8,383,329 8,143,991 7,258,377 6,179,234 3,139,818 2,523,403 1,982,689 1,170,464

Financed by:

Share capital 13,487 13,398 13,398 13,396 12,987 12,899 12,103 11,648 11,060 10,928

Holders of perpetual capital securities 503,000 503,000 503,000 504,415 – – – – – –

Reserves 2,493,679 2,593,680 5,033,287 4,619,509 3,918,012 3,611,572 2,252,878 1,696,432 1,245,982 1,041,317

Shareholders’ funds 3,010,166 3,110,078 5,549,685 5,137,320 3,930,999 3,624,471 2,264,981 1,708,080 1,257,042 1,052,245

Other non-current liabilities 1,583,752 1,665,426 2,833,644 3,006,671 3,327,378 2,554,763 874,837 815,323 725,647 118,219

4,593,918 4,775,504 8,383,329 8,143,991 7,258,377 6,179,234 3,139,818 2,523,403 1,982,689 1,170,464

Glossary


In this Report, unless otherwise specified the following glossary applies.

2003 Option Scheme the share option scheme of the Company adopted by the Shareholders at the annual

general meeting of the Company held on 12 May 2003 which expired on 11 May 2013

2014 Option Scheme the share option scheme of the Company adopted by the Shareholders at the annual

general meeting of the Company held on 15 May 2014

Adoption Date The date of adoption of the Share Award Scheme by the Shareholders at the annual general

meeting of the Company held on 21 May 2015

associate(s), chief executive(s), connected person(s), substantial shareholder(s)

each has the meaning as described in the Listing Rules

Award Shares the Shares granted under the Share Award Scheme to an eligible person(s) approved for

participation in the Share Award Scheme

Board the board of Directors of the Company

Company, Li & Fung Li & Fung Limited, a company incorporated in Bermuda with limited liability, the shares of

which are listed on the Stock Exchange

Continuing Operations Trading Network and Logistics Network

Director(s) a director(s) of the Company

Discontinued Operations Global Brands Group, the spin-off of the Company’s licensed brands and controlled brands

business

FH (1937) Fung Holdings (1937) Limited, a company incorporated in Hong Kong, which is a substantial

shareholder of the Company

Fung Distribution Fung Distribution International Limited, a company incorporated in the British Virgin Islands,

which is a wholly-owned subsidiary of FH (1937)

Global Brands Global Brands Group Holding Limited, a company incorporated in Bermuda with limited

liability, the shares of which are listed on the Stock Exchange

Global Brands Group Global Brands and its subsidiaries

Group the Company and its subsidiaries

HK$ Hong Kong dollar(s), the lawful currency of Hong Kong

Hong Kong the Hong Kong Special Administrative Region of PRC


Glossary (continued)

HSBC Trustee HSBC Trustee (C.I.) Limited, acting in its capacity as the trustee of a trust established for the

benefit of the family members of Victor Fung Kwok King

King Lun King Lun Holdings Limited, a company incorporated in the British Virgin Islands owned 50%

by HSBC Trustee and 50% by William Fung Kwok Lun

Listing Rules the Rules Governing the Listing of Securities on the Stock Exchange

Model Code Model Code for Securities Transactions by Directors of Listed Companies under Appendix 10

of the Listing Rules

PRC the People’s Republic of China

Report the annual report of the Company for the year ended 31 December 2015

SFO Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

Share(s) ordinary share(s) of HK$0.0125 each in the share capital of the Company

Shareholder(s) holder(s) of the Share(s)

Share Award Scheme the share award scheme of the Company adopted by the Shareholders at the annual

general meeting of the Company held on 21 May 2015

Share Option(s) the outstanding option(s) granted under the 2003 Option Scheme and/or

2014 Option Scheme

Stock Exchange The Stock Exchange of Hong Kong Limited

US$ United States dollar(s), the lawful currency of the United States of America

Corporate information

Executive DirectorsWilliam Fung Kwok Lun

Spencer Theodore Fung


Non-executive DirectorsVictor Fung Kwok King

Paul Edward Selway-Swift*

Allan Wong Chi Yun*

Margaret Leung Ko May Yee*

Martin Tang Yue Nien*

* Independent Non-executive Directors

Chief Financial OfficerEdward Lam Sung Lai

Group Chief Compliance andRisk Management OfficerJason Yeung Chi Wai

Company SecretaryTerry Wan Mei Chow

AuditorPricewaterhouseCoopers

Certified Public Accountants

22nd Floor, Prince’s Building

Central, Hong Kong

Principal BankersThe Hongkong and Shanghai Banking Corporation Limited

Citibank, N.A.

JPMorgan Chase Bank, N.A.

Standard Chartered Bank (Hong Kong) Limited

Legal AdvisorsMayer Brown JSM

16th-19th Floors, Prince’s Building

10 Chater Road, Central, Hong Kong

Registered OfficeCanon’s Court, 22 Victoria Street

Hamilton HM 12, Bermuda

Hong Kong Office11th Floor, LiFung Tower

888 Cheung Sha Wan Road

Kowloon, Hong Kong

We are Li & Fung

(Incorporated in Bermuda with limited liability)

Stock Code: 4942015Annual Report

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LI & FU

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LIFUNG TOWER888 Cheung Sha Wan RoadKowloon, Hong KongTel. (852) 2300 2300 www.lifung.com